Daniel

Daniel Ferrell-Schweppenstedde

Policy and Public Affairs Manager

Charities Aid Foundation

The future of giving – and what have we learned during the pandemic?

5 March 2021

The protracted crisis brought about by the Covid19 pandemic has already led to major shifts across society. Some of these could lead to further lasting changes in many sectors, if the way in which individuals interact with each other, with institutions and organisations is permanently transformed.

What might this mean for how individual giving is likely to develop in the future? We were invited to talk about these questions at a recent London Funders event, presenting also our work on how UK giving has developed during the first phase of the pandemic, which formed the basis of the topics discussed below.

Long-term macro drivers (economic, cultural, technological, regulatory etc.) as well as big societal and global shifts (like the pandemic) clearly have an effect on the landscape for charitable giving.

In order to understand what this effect might be, we need to ask questions about how these factors affect the ability of different actors to mobilise resources and match them with existing needs; how they might shape new channels for giving; and how they could influence our individual behaviour (i.e. our motivations for giving and what informs our decision about where and how to give).

Whilst looking ahead has become more difficult than ever, it is vital that we try to identify and understand key trends and think through the possible future scenarios they may lead to.

This is clearly a major task, but in this blog we will explore a snapshot of possible trends and how they could impact charities and charitable giving.

Digital is the new normal

Since the start of the pandemic all types of transactions have become more digital.

This graph (based on ONS data) shows internet sales as a percentage of total sales rising from 19% in February to over 30% in May 2020 when the first lockdown hit.

But the share only drops to 26% in August 2020 when people were allowed to go back to the shops, and has been rising again with the introduction of further lockdowns.

Digital transactions seem to have become ever more normalised. (It should also be noted that Paul de Gregorio from Rally has previously highlighted this interesting data).

Internet sales as a percentage of total sales
   Source: ONS 2020

The crisis has hit the charity sector hard because many vital activities including training, fundraising and service delivery traditionally rely on in-person transactions and were shut down overnight. At the same time, the need for their services did not go away: in fact, in most cases it increased.

When looking at the response of individuals we can see that online giving made up for some of the large decline seen in cash giving during the first lockdown. But the evidence also suggests that giving during the pandemic has become more digital than ever before. This builds on the existing growth of online giving, reflected in the increasing proliferation of platforms and apps (both charitable and commercial) that enable people to support good causes.  However, one effect of the enforced pivot to digital we have all had to make during the pandemic appears to have been accelerating this trend towards digital giving even further.

Proportion of recent donors who gave via cash or web
Proportion of recent donors who gave via cash or website/app in the last four weeks. Source: CAF
  

This coincides with the UK becoming an ever more cashless society overall. Whilst it still remains to be seen whether changes to giving behaviour become permanent post-pandemic, this does point to the fact that charities’ ability to collect and process donations digitally is more important than ever before. Those charities that laid the groundwork for digital transformation before the crisis and were already agile have an advantage here. The challenge for the sector as a whole will be to ensure that others are able to catch up.

Accelerated transformation plans and remaining digital deficits

Charities have reacted to this changing environment and have started to adjust their operating models; increasing their ability to ask for and receive donations online. In our research we found that one in five charities have accelerated their plans to raise funds online, while an equal number were concerned about the shortfall in cash.

However, there also appears to be worrying evidence of a “digital deficit” in some parts of the sector. One in ten charities in our research, for example, stated that they cannot afford the technology needed to adapt to the new fundraising environment.

   
  
the view from charities
  

Towards the end of 2020 we asked charities whether the pandemic is accelerating a drive towards online fundraising. 53% agreed that there is a need to shift to an online fundraising approach, 46% agreed that donors are likely to be open to online giving, and 47% said they had already changed their fundraising methods. But when asked if they actually conduct any online fundraising at the moment, 62% replied that they did not.

This resonates with findings in CAF’s latest Charity Landscape report. Three quarters of charity leaders (77%) believe that technological change is relevant but only one in five (18%) said they know how to manage online fundraising effectively.

A broadening landscape of doing good

It may not be just the ways in which we are giving that are changing - is our very notion of what counts as giving changing too? There are signs that it may be; many of which are linked to trends that were already in evidence, but which once again may have been accelerated by the Covid-19 crisis.

The rise of mutual aid groups during the pandemic, for instance, may be further evidence of a growing desire for participation. Millions across the country joined efforts to help people affected by the crisis in their local areas by donating time, goods as well as money. This apparent renewed interest in personal involvement when addressing societal issues raises wider questions for civil society organisations across the board. One outcome of the pandemic could be that an increasing number of donors want their relationship with the organisations and causes they support to be less transactional.

Depending on the future economic situation, informal peer-to-peer giving could also become more important. We know already from our research into UK giving in the first half of 2020 that a larger number of people mentioned that they were helping out people they know - either through direct financial support, by buying goods or services for them, or by donating their time to assist them with challenges they face.

New digitally-enabled networks, which had already been prominent in recent years, also seemed to gain further momentum during the pandemic - with the Black Lives Matter movement being the most prominent example. What could this mean for patterns of participation post-pandemic, and how should ‘traditionally organised fundraising charities’ position themselves in relation to these movements if they sustain their energy in the coming years?

There could be also more blending between giving and commercial transactions going forward. Does the advent of cause-related marketing and ethical shopping, for instance, mean that people are counting parts of their consumer spending increasingly towards their overall “social good total”; in particular when there is a real transaction involved (e.g. a percentage of a payment being directly donated) or when people buy a product to support a particular group or further a cause?

Government also provided a large subsidy for the service industry in 2020 and called it ‘Eat Out to Help Out’. People might not have considered it as a straightforward donation when they went out to their favourite local restaurant to prevent it from closing, but the language used in the campaign clearly centred around notions of support and local action - perhaps pointing to the state and the public sector seeking to harness some of the motivations that would traditionally be associated with giving to charity?

Our connection to charity and the causes we support

Trust in charities is up. There are many potential reasons that this might be the case as a result of the pandemic: it may be that more of us recognise the role charities play in our lives, it may be that we are more likely to have seen a direct impact of the work of charities in recent months, or it may be that more of us have supported a charity by donating time, money or goods to help tackle the crisis.

Charities have also received better press coverage in the past year, in particular when it comes to those that are considered as providing “frontline services” to help those most affected by the pandemic. More negative coverage might have not cut through as much, or was more confined to particular sub-sectors rather than painting all charities with a broad brush as it has often been the case in the past when negative stories have emerged.

    
Are charities trustworthy

Q: To what extent do you agree or disagree that most charities are trustworthy? Source: CAF 2020

Whatever is driving the shift in terms of trust in charities, it does suggest that narratives centred around the idea that charities are facing an ongoing decline in trust that could have a wider bearing on the willingness of the public to support them feel slightly misplaced at this point in time. (Which is not to sidestep the broader discourse around the need to help improve transparency and be more effective at communicating purpose and impact across the sector).

Changes in Most Popular Cause Areas

We asked people starting in April 2020 about any changes to their giving habits as a direct result of the impact of the pandemic. Just over one in ten (11%) people said that they have given to new or different causes because of Covid-19, and around one in six (17%) reported donating to charities which support the NHS.

We also found that at the first height of the pandemic in 2020 there was a large increase in the proportion of donors giving to ‘hospitals and hospices’ (which was 2019’s fourth most popular cause).

Other causes such as children or young people and medical research seemed to have lost out temporarily, with medical research missing out of an estimated £174m in the first half of 2020, as donations and sponsorships were also dropping due to major events and fundraising activities being halted. More information is available in our special report on UK Giving and Covid-19 by CAF’s research team.

Long term trends in key giving behaviours
     Source: CAF 2020

While the data shows that giving has held up remarkably well (or even increased by £800m in the first half of 2020 compared to the same period in 2019), shifts in the market and giving behaviours could have come at a cost to many charities and causes that have not have been able to benefit from this continued generosity. But we still have to see whether these shifts are temporary or will become more ingrained over time.

What’s next? The short and medium-term outlook

Two big factors will dominate the wider picture and shape trends in giving as we emerge from the pandemic: namely the scale and nature of the likely economic recession and the response to it from individuals and government. Disposable incomes, for instance, were still available for many in 2020 due to furlough schemes and other support for the economy being in place. We could now see a deferred recessional impact. The Spring Budget has focussed on maintaining support for workers and businesses on the way to recovery and the OBR expects GDP to return to pre-Covid levels by mid-2022, six months earlier than previously thought. But it also said that in five years from now the economy will be still be 3% smaller than it would have been without the crisis.

Projections for the post-pandemic labour market differ. In July 2020 the OBR expected unemployment to peak at 11.9% but forecasts now a much lower peak at 6.5% which means 1.8m fewer people are expected to be out of work than previously thought. The question here is whether and how unemployment and consumer confidence will impact giving. Pro Bono Economics reports that for now the labour market response is more concentrated within certain groups (younger, older, and lower-paid workers), but is increasingly likely to spread to cover a broader population which could then also impact on charity income overall.

But we also know that past large economic and political events had less of an impact on giving than one might have anticipated. And a year ago we were concerned about giving at least plateauing in many countries in the Global North. This might have been paused or even reversed temporarily due to the pandemic, at least in the UK context.

This leaves us with a complex picture. In the first half of 2020, roughly the same number of people gave compared to the year before, but they did so slightly above levels we would have normally seen for this time in the year. We don’t know if this a permanent change and it may also be that the spike in giving in the first half of 2020 was a blip reflecting giving brought forward, meaning that 2021 could look very different in terms of people’s ability and willingness to give. Previous analysis conducted by CAF has also suggested that charitable giving is broadly maintained even during major economic events such as the financial crisis.

The question, then, is whether we will find ourselves in a post-2008 scenario where giving rebounded quickly, or whether the social and economic impact of Covid-19 will be more severe in such a way that it also changes the giving landscape. The answer to this this will also depend on the nature of the recovery and how it is being managed by government, given the magnitude of the crisis to date.

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