Daniel

Daniel Ferrell-Schweppenstedde

Policy and Public Affairs Manager

Charities Aid Foundation

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Household giving may have held steady amid Covid-19, but charities are still in crisis

16 November 2020

The pandemic’s effect on charities has been profound on so many levels.

Fundraising and trading income has plummeted for many, just as demand for their services continues to rise. As a result a funding gap has opened, which experts estimate could be up to £10bn until the end of 2020.

CAF’s UK Giving Covid-19 Special Report offers us some cause for cheer as polling conducted for CAF by YouGov found that despite the challenges of the pandemic, household levels of charitable giving remain steady. But these findings are little comfort to the one in four UK charities that have told us that without significant help they do not believe they can survive for a year.

Here, we take a look at some of the factors at play for different charities which might help flesh out the scale of the funding crisis they face.

    

Charities have different starting points

Whilst across the sector reserves are lower than they should be ideally, current asset cash for the top 5,000 charities has reached an all-time high of £17.9bn (compared to £14.7bn in 2014/15). This picture might be skewed by 2019 data, and the landscape has now shifted dramatically, but it highlights the fact that different charities came into the crisis in very different positions and that has shaped their ability to absorb shocks.

Some organisations are facing  additional strain beyond fundraising. Charities working in development, for example, are facing not only the impact of the crisis on their fundraising and service provision, but also a massive reduction in size of the governmental aid budget (being 0.7% of GNI) and major changes in how it is being distributed.

Not all organisations experience this crisis in the same way. Governance models and income structures have a major bearing and charities also differ in their ability to pivot services or make use of government support (in particular the furlough and job support schemes). And with some early indication in the US that assets might rebound quicker than thought, organisations that rely on endowments may actually find their finances buoyed by the markets (at least in the short term).

Individual giving in a crisis

Past data suggests that people do not stop giving during a crisis (as we saw during the 2008 financial crash, for instance), and we have seen a similar pattern for early 2020. The incredible generosity of the British people has again come to the fore in this pandemic.

Despite economic and social uncertainty, the overall proportion of people who reported that they had donated money to charity has held up, and between January and June 2020, the UK public donated a total of £5.4 billion to charity – an increase of £800m compared to the same period in 2019. These are levels normally seen during the peak fundraising months of November and December when major events such as Children in Need and Christmas-linked fundraising appeals are launched.
  
This surge in donations during the lockdown months in the spring reflect an increase in giving to NHS-linked charities. Up to a fifth of people specifically reported donating to charities which support the NHS during that period. Yet at the same time, in other areas (youth, animal welfare etc.) charities saw drops in giving – a trend that has since begun to revert back to normal patterns as restrictions were gradually lifted in the UK.  Medical research, which traditionally benefits strongly from donations via fundraising events such as the London Marathon and coffee mornings, was particularly hard hit - losing out on an estimated  £174 million during the first half of 2020.
  
UK Giving photo
There have been a number of major fundraising campaigns and appeals so far this year; some broad-based such as the 2.6 Challenge or the BBC Big Night In, and others focussing on specific cause areas. While these initiatives raised money and awareness of the plight of charities, further analysis will help us to understand whether they generated additional giving or merely re-directed donations that would have gone to different cause areas or possibly brought forward donations that would otherwise have been made later in the year.

Where does this leave us?

Some charities, most notably NHS Charities Together, have gained both profile and support during the pandemic, either through their own efforts or via broader appeals and campaigns that have helped to motivate people to give. However, at the same time many charities such as foodbanks have seen demand soar beyond what even an increase in donations can match. Others have faced drops in income; the closed charity shops, lost entrance fees, the opportunity to give via charity tins that many people do not even think to report as part of their charitable giving all adds up and the scale of these is such that donations cannot be expected to fill the gap. This helps to explain why both messages can be right, even if they perhaps feel contradictory: giving is not down, but large parts of the sector are still in financial distress or even at the brink of disappearing.

We also have to look at other factors. Will there be a giving fatigue that might set in after the winter campaigns have finished? Can charities manage the pressure of having to deliver even more services while still making the case to donors showing the impact of their work in order to keep people engaged? How quickly could a vaccine impact economic recovery and people’s corresponding ability to give?

The additional data from our UK Giving survey can help illuminate how the giving landscape has changed since last year and how it intersects with the wider funding environment for charities in the UK. The generosity of the British public has been shown to be very much alive and well during these times of rapid change. But the overall message that charities still need significant support still holds true – which is why the call for a temporary increase to Gift Aid and other proposals have been put forward to Government.

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