# Charities on the “cliff edge”: the third sector in 2021

- Link: https://fundraising.co.uk/2021/01/05/charities-on-the-cliff-edge-the-third-sector-in-2021/
- Published: 2021-01-05T19:37:21+00:00
- Author: Helen Packer

**“Our organisations are going to be the ones picking up the pieces”, says Olivia
Barker White. As a trustee of The Small International Development Charities Network(
SIDCN), she has spent the last six months [campaigning for more government support](https://smallbutmighty.co.uk/)
for international aid organisations. But many charities, both in the network and
across the sector, are starting to wonder if they’ll still be around to pick up 
the pieces when the worst of the pandemic is behind us.**

Many charities’ traditional revenue streams have been constricted by the coronavirus
outbreak. Lockdowns have forced them to [close the doors to their shops](https://fundraising.co.uk/2020/03/19/oxfam-to-close-high-street-shops-in-response-to-pandemic/),
while organisers are cancelling marathons and businesses are slashing their giving
budgets.

At the same time, more and more people are suffering from the catastrophic effects
of Covid-19. They’re turning to charities for support, with no end in sight. [75% of charities](https://www.probonoeconomics.com/november-15-20-covid-charity-tracker-survey-results)
expect higher levels of demand over the next year, according to Pro Bono Economics.

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Unfortunately, many of them may no longer exist by the end of 2021. Despite vaccinations
ploughing ahead and signs – albeit small ones – of economic recovery, [14% of charities](http://cpwop.org.uk/wp-content/uploads/sites/3/2020/11/Respond-recover-reset-the-voluntary-sector-and-COVID-19-November-2020.pdf)
said in November they were unlikely to still be operating then. This was 10% more
than in October. For certain sub-sectors, the picture is even bleaker. SIDCN found
that [45% of their members](https://drive.google.com/file/d/1hhXyjEvv1EXUdOA1kGRRU66x5YCtCCAR/view)
don’t expect to survive until the end of the year.

So if the world can recover, why can’t charities? As the UK enters its third lockdown,
more problems are on the horizon, including Brexit and government cuts. Charities
are facing a crisis that threatens the survival of much of the sector.

## The government response

In April 2020, chancellor Rishi Sunak pledged to help “local charities who provide
so much compassion, care and community to the most vulnerable in our country.” With
these words came a [£750 million support package](https://fundraising.co.uk/2020/04/09/government-announces-750m-covid-19-package-for-charities/)
for frontline charities across the UK. This was on top of other government support
that charities were eligible for including the Coronavirus Job Retention Scheme (
furlough).

“Although it is a large sum of money, there are hundreds of thousands of charities”,
points out Simon Johnson, non-executive director at [HW Fisher](https://www.hwfisher.co.uk/)
and charity trustee, “so there are very few that are going to benefit from it directly.”

The chancellor’s commitment barely scratches the surface of the estimated [£10.1 billion funding gap](https://fundraising.co.uk/2020/06/10/charities-face-10-1-billion-funding-gap-over-next-six-months/)
charities faced in 2020. Sarah Vibert, director of public policy and volunteering
at [NCVO](https://www.ncvo.org.uk/), points out that both the sector-specific package
and the furlough scheme are short-term. This means many charities are heading straight
for a “cliff edge” at the end of the financial year.

Sunak’s support also overlooked the thousands of charities delivering frontline 
services abroad. [SIDCN found that](https://drive.google.com/file/d/1l6tjTDdFnR-7tW998wsz5AtHCgISfZJs/view)
while 89% of their members have responded directly to Covid-19, only 4% have received
any government funding, including furlough. Many volunteer-led organisations were
ineligible for furlough while small charities couldn’t participate without a significant
reduction in their output at a time of high demand.

In his autumn spending review, Sunak delivered an additional blow to international
development charities, cutting the overseas aid budget from 0.7% to 0.5% of gross
national income.

## Brexit

While many of us are happy to see the end of 2020, this year starts with another
setback for the third sector: Brexit. Until now, the UK benefited from £1.5 billion
per year from the European Social Fund, aimed at reducing inequality and investing
in disadvantaged communities. While some of this goes directly to charities, much
of it is used by authorities to invest in local services, reducing the strain on
charities’ resources.

Losing this income is likely to compound the existing issue of local government 
funding cuts. [Research by The Lloyds Bank Foundation](https://fundraising.co.uk/2020/12/15/small-charities-stepping-up-covid-challenges-despite-funding-issues-need-more-support-report-urges/)
has found that these cuts have already exacerbated problems for charities, as people
turn to them for services they no longer receive from their local authority.

The government has committed to replacing EU funding with the UK Shared Prosperity
Fund, but the details of its plans are unclear. In his autumn spending review, Sunak
announced a £220 million pilot programme to launch in 2021. The government has yet
to set out how long it will take for this figure to reach the £1.5 billion pledged.

## What next?

Stakeholders are calling for further government support to save the sector. [#NeverMoreNeeded](https://nmn.org.uk/),
a national campaign to support charities, has suggested five key measures. These
include an increase in the amount of Gift Aid charities can claim, the redistribution
of dormant assets and increased funding for local authorities.
But as the government
faces competing demands from other struggling industries, it is unlikely to part
with its cash eagerly. Charities need to look at other ways to survive and they 
need support to do so. [The Lloyds Bank Foundation](https://fundraising.co.uk/2020/12/15/small-charities-stepping-up-covid-challenges-despite-funding-issues-need-more-support-report-urges/)
is calling for non-government institutional funders to shift to longer-term, core
investments to help the sector survive.

The general public can also help. [CAF’s 2020 Giving Report](https://fundraising.co.uk/2020/10/29/first-months-of-lockdown-saw-public-give-extra-800m/)
highlights that, despite widespread financial pressure, public giving has remained
at a similar level to last year. But there are winners and losers within this. While
NHS charities and hospices have seen a welcome surge in donations, public giving
to medical research charities has fallen.

For those who cannot afford to donate, there are other ways to support. Digital 
and micro-volunteering have become more popular as people have been forced to stay
home. Pro-bono time and skills can be a lifeline to small charities, according to
Barker White.

And for the charities that won’t make it through? They shouldn’t bury their heads
in the sand. Johnson says charities need to take responsibility for their futures.
If they are at risk of closure, then trustees need to begin thinking about how this
can have the least impact on beneficiaries. This includes working with other charities
to transfer resources and assets so that service users can continue to benefit. 
Sadly for some charities, it may already be too late.