One in six charities fear closure as charity funding crisis hits

9 December 2012

One in six charities believe they may face closure in the coming year amid public spending cutbacks and falling donations from the public, according to a new poll of charities.

Nearly half of charities say they are being forced to dip into reserves to maintain their work, while nearly one in three say they fear being forced to cut services or jobs, according to the survey, commissioned by the Charities Aid Foundation (CAF).

More than eight out of 10 charities believe the charity sector is facing a crisis, with two in five (40%) worrying that their charity may be forced to close if the economic situation does not improve.

Eight out of 10 believe that the economic situation is the greatest threat to UK charities, while nearly three quarters (73%) believe that charities are unable to fulfil their goals due to a reduction in donations or Government funding.

Research specialists Research Now surveyed 252 senior workers in charities of all sizes.

The survey found:

  • 17% said it was likely that their charity may face closure in the next 12 months
  • 40% worry that their charity may have to close if the economic situation does not improve
  • 49% say they have had to use reserves to cover income shortfalls over the last year
  • 26% say they had cut front-line services
  • 25% say they had made staff cuts
  • 90% believe generating more income is going to be their greatest challenge
  • 85% believe that “given the current economic situation I am concerned for the future of UK charities”
  • 81% believe that the current economic climate is causing the charity sector to be in crisis
  • 80% believe that the economic situation is the biggest current threat to the future of UK charities and their own charity
  • 73% believe that charities are unable to fulfil their full philanthropic goals, due to reduction in government funding and/or donations
  • 68% believe that the economic downturn has affected the services their charity provides
  • 45% believe that their charity will have to scale back its work over the next 12 months
  • 35% say that they can see the economic situation improving in the next 12 months

The survey showed the effects the downturn has already had on many charities. Nearly half of the executives surveyed (49%) said they were using reserves to cover income shortfalls in the past 12 months. More than a quarter (26%) said they had cut front-line services and one in four (25%) said they had made staff cuts.

Earlier this month, research by CAF revealed that small and medium sized charities are facing spiralling losses, with reported deficits of more than £300m in 2011 -  compared with an overall surplus of £325m in 2007.

Last month, CAF launched Back Britain’s Charities with the National Council for Voluntary Organisations (NCVO) which calls on the Government, businesses and people to get behind the nation’s charitable organisations.

CAF and the NCVO are calling for:

  • People to support charities through regular giving, regardless of how much time or money they can give.
  • The Government to modernise and promote Gift Aid and payroll giving so donations go further.
  • The Government to ensure that public bodies do not cut funding for charities disproportionately when making spending reductions.
  • Business to support charities either through donations, or through practical means.
  • Charities to work together with the Government to modernise and improve fundraising and enhance their impact, so that every pound given goes further towards helping beneficiaries.

John Low, Chief Executive of the Charities Aid Foundation, said: “Times are tough and people have less money to donate to charities.  This combined with significant public spending cuts and increased demand for charity services, is having a shocking effect on many charities, calling into question their very viability.

“Many organisations are having to dip into their reserves, cut vital frontline services and some are even concerned about whether they can survive in these toughest of times.

“Charities of all sizes play an essential role in our society, providing social care and education as well as helping some of the most vulnerable people in our communities.  We all need to act now to support Britain’s charities so they can continue their vital work.”

The fieldwork for the survey was conducted by Research Now between 18 September 2012 and 1 November 2012. An online survey was completed by 252 senior level charity workers, who have direct and significant input into the financial, operational, or fundraising strategy of the charity.

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