While it is too early to determine the full impact of the coronavirus pandemic on the charity sector’s finances, the sector will inevitably be smaller in the immediate future at least, according to the National Council for Voluntary Organisations (NCVO).
NCVO publishes its annual UK Civil Society Almanac today, which looks at the charity sector’s finances. Because of the time delay in charities’ accounts being compiled, audited and published, the latest data covers the financial year 2017/18.
It shows modest income growth in the sector during 2017/18, reserves back to their pre-financial crisis level and employment in the sector at a record high. However, with government income at its lowest ever level and public money the main source of income growth, the forecasted post-Covid economic downturn is likely to have a direct impact on finances.
In more depth, the Almanac shows a modest income growth in the voluntary sector of 2% in 2017/18. This was the same level as for the previous year, 2016/17, and confirms a trend of the levelling off of faster growth seen in the years prior, according to NCVO. Total income went up by £1.2bn between 2016/17 and 2017/18 to £53.5bn, but almost half of this increase came from two individual legacies that totalled £555m.
While voluntary incomes were not hit as hard as expected during lockdown with a joint survey by the Institute of Fundraising, NCVO, and Charity Finance Group showing that voluntary income from the public dropped by 14% whereas trading income fell by 72%, NCVO warns that this may represent a lagged effect as was the case following the previous recession in 2008/09.
The Almanac also shows that while government income grew £280m from the previous year to £15.7bn in 2017/19, this was its lowest point on record as a proportion of the sector’s total income, at 29%. This, it says, reflects other income streams outpacing growth in income from government with the increased reliance on other sources of income further suggesting that decreased income from the public will have a negative impact on the sector.
Reserve levels completed their recovery to pre-financial crisis levels, reaching £63.5bn in 2017/18: just over the previous high of £63.2bn in 2007/08.
Additionally, NCVO notes that it took seven years to recover its net assets to pre-2008 levels following the global financial crisis. The speed of bounce back this time will vary for different subsectors, it says, and will largely depend on the overall economic recovery.
Employment & volunteering
And, while employment hit a record high of 900,000 in 2019, representing almost 3% of all the total UK workforce, the predicted loss of income will mean restructures within charities and redundancies across the voluntary sector.
The pandemic is also likely to change how people volunteer. While NCVO believes it is unlikely to influence the overall numbers of people volunteering in the UK, with those aged 65–74 the most likely to volunteer regularly, the virus could see the voluntary sector increase the amount of remote volunteering available to accommodate the needs of their members. Current volunteers may also shift where they volunteer depending on where they view help is most needed during the recovery.
Karl Wilding, Chief Executive of the National Council for Voluntary Organisations (NCVO), said:
“Charities have a vital part to play in tackling coronavirus, and in helping the country rebuild after the crisis and beyond. The way in which we saw charities and volunteers collectively support their communities during lockdown was a clear example of the immense difference the sector makes to our society.
“Despite this, the voluntary sector will inevitably shrink in the immediate future. Public income being the main source of income growth means that social distancing restrictions and a reduction in people’s disposable incomes will have a direct impact on charities’ incomes. Undoubtedly, this will result in job losses, a possible reduction in services and the closure of some charities.
“We will continue to make the case to government, charities and volunteers can reboot the economy, reconnect our communities and contribute to positive social and wellbeing outcomes at a time of extreme challenge. Helping those affected by business closure or job losses, supporting good mental health, and supporting individuals and communities in need – all of which will are central to getting the country back on its feet.”
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