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‘Grim picture’ of post-pandemic sector finances as income falls for first time in a decade

Melanie May | 12 October 2023 | News

Looking down into a jar of coins. Photo by Nick Fewings on Unsplash

Overall sector income fell in 2020/21 – reversing a trend of year-on-year growth that had lasted a decade, according to the NCVO’s 2023 UK Civil Society Almanac – launched today.

Charity income had been growing year on year since 2012, but fell in 2020-21 despite an increase in income from the government.

An analysis of research and statistics on the health of the UK voluntary sector, the National Council for Voluntary Organisations (NCVO) 2023 UK Civil Society Almanac shows that the overall income of the sector declined by a total of £1.8bn (3.06%). It fell from £58.7bn in 2019/20 to £56.9bn in 2020/21. Taking inflation into account, income was 6% lower than the previous year.

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Spend was £53.8bn – 95% of total income. Most of this (£36.9bn) goes towards charitable activities (69%), followed by £9.6bn in grants (18%) and £6.5bn in activities for raising funds (12%).

Public donations remained the biggest income source (46% or £26.4bn) for the sector, although larger charities (income over £1million), received more from government grants and contracts.

Government intervention, increased funding and schemes like furlough meant charity closures during the pandemic years were lower than anticipated. However, there were less registrations on new charities than in previous years, and many saw their income fall. Small organisations (those with an income below £1million) saw funding fall by £4.6bn compared with 2019/20, while larger organisations, saw their income rise by £4.5bn in 2020/21.

Size of the sector

The NCVO’s data shows that there were 163,959 voluntary organisations in the UK in 2020/21, with the vast majority micro and small organisations. While the pandemic appears to have encouraged the growth of micro organisations in 2020/21, the NCVO says, there was a decline in the number of small and medium-sized organisations.

Volunteering

The Almanac also reports on volunteering, revealing that an estimated 14.2mn people in the UK volunteered through a group, club or organisation at least once in 2021/22 – with almost half of the population volunteering informally at least once. Formal volunteering levels dropped sharply from 2019/20 to 2020/21. In 2021/22, monthly formal volunteering stayed at the same level (at 16%) but with a further decline in volunteering at least once a year (to 27%). Both of these are the lowest rates recorded by the Community Life Survey. Formal volunteering levels remain well below the pre-pandemic levels in 2021/22.

Nayyara Tabassum, Research and Insight Manager for NCVO, said:

“The data trends show how the charity sector income shrunk by a whopping £1.8bn due to the covid pandemic –an amount which could have been used to help those most in need, and prevent organisations closing. This is the first time we’ve seen sector income decline in eight years.

 

“There are also some very interesting differences between bigger and smaller charities. Commissioned services and grant funding make up the largest proportion of income for bigger charities, whereas its donations from the public which boost the income of small organisations. We even found that staff in medium sized charities are less well remunerated, with their colleagues in big and small charities paid more on average.”

Sarah Vibert, NCVO CEO added: 

“Our data reveals a grim picture of the sector’s post-pandemic finances – with income dropping for the first time in years. This has been particularly felt by smaller charities, who despite the continued goodwill and generosity of the public, saw a significant income reduction. This left them extremely vulnerable to the cost-of-living crisis, and many simply couldn’t weather this storm.

 

“We are now facing the long-covid effect. Each day we see smaller voluntary sector organisations make tough decisions to scale back, cut services or shut their doors for good. Charities, and the communities they support, need and deserve a more sustainable future if we’re going to make any progress in addressing inequalities across the country.”

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