Sector survey shows further funding challenges on horizon

Melanie May | 15 March 2021 | News

Cover of NCVO's Respond Recover Reset report from February 2021

Charities are projecting declines in funding from all income sources in the next financial year, according to a survey, with two in five having six months left of reserves.

Nearly 600 voluntary organisations from across the UK responded to a survey for the fifth snapshot report in the Respond, Recover, Reset: The Voluntary Sector and Covid-19 project, which is led by Nottingham Trent University, the National Council for Voluntary Organisations (NCVO) and Sheffield Hallam University.

Respondents were asked to project changes to their income streams for the 2021/2022 financial year compared with the period before the pandemic.

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Overall grants income is expected to decline only slightly (average percentage change of -3%), despite concerns of voluntary organisations approaching a financial cliff edge as emergency grants expire at the end of this year. Further declines were projected for service delivery contracts (-7%), public donations (-8%), investments (-10%), other income sources (-13%) and trading activity (-17%).

According to the report, despite the possibility of opening shops, increasing face-to-face service delivery and engaging in other forms of trading as the UK follows the government’s roadmap out of lockdown, these declines in income streams indicate that there will be an overall contraction of income for the sector in comparison to where the sector was pre-Covid.

The research also underlines that while the pandemic has put the sector under immense pressure, its impact has been “uneven and unpredictable” with individual charities’ experiences varying widely. While 43% of respondents have reduced their range of services since March 2020, 37% have widened their range of services.

In addition, nearly a third (31%) of respondents have reported an increase in total income since last year, while 47% said income had dropped. And while 33% of respondents say their financial position had deteriorated over the past month, nearly half (48%) said it was unchanged, and 18% reported an improvement.

Alex Farrow, head of networks and influencing at NCVO, said:

“The voluntary sector is huge, complex and diverse. This report outlines that Covid-19’s impact has been, and will continue to be, uneven and unpredictable across a sector already facing higher demands on its services.”

“While many organisations have been able to build up reserves, half of organisations are using them to cover day to day costs. The expected downturn in income – even for those organisations seeing only marginal declines – is worrying not just for the charities and groups involved, but for the lives and communities that they serve.”

Daniel King, Professor of Organisational Behaviour at Nottingham Trent University, said:

“We continue to see major challenges across the sector, with overall income expected to fall in all areas in comparison to the financial year before the pandemic. However, the extent of this impact varies a lot depending on the size, location and type of organisation. Even as restrictions are lifted our results show that organisations are concerned that their income will still be impacted, particularly around trading and investments, meaning that many organisations will still be vulnerable and struggle to cope in the new financial year.”

Among other findings, the Barometer shows: