Three-quarters of the 54 charity members who responded to a survey in October reported a worse financial position than a year ago and 62% said they are now running deficits. Only 10% saw an improvement in their financial health during the year.
The survey received responses from a range of charities in terms of both size and sector. 3 in 10 respondents were from health or social care charities, whilst arts/culture (19%), education (11%) environmental (11%) and religious (6%) charities were also well represented in the data. Meanwhile, over a quarter of respondents were from charities that employed less than 25 people, whilst another 26% were from ‘super-major’ organisations with annual incomes over £10m.
Major cost pressures
The 1.5% rise in ERNICs, announced by Rachel Reeves in October 2024 and implemented in April 2025, has emerged as a major cost driver, with 46% of charities reporting it is having a major impact on their finances. This comes alongside persistent inflation, increased energy costs, and rises in the National Living Wage, creating a difficult situationfor the sector.
With 3 in 10 respondents in our survey representing health or social care charities, and education and environmental charities also well represented in the data, the
Impact on staff and services
The human cost is stark, with over half of the respondents (51%) saying they have not filled vacant positions, whilst 35% have made staff redundant and a further 35% have cancelled plans for new hires. More than one in five said they have frozen or reduced salaries.
The impact on beneficiaries is equally concerning. More than a fifth of respondents have reduced or closed services, whilst a quarter have cancelled plans for new services. Many others warn they are considering similar measures in the coming months.
A bleak outlook for many
Looking ahead, the charities are far from positive about what the future holds. Nearly two-thirds of the respondents anticipate needing to take further cost-reduction measures in the next six to 12 months, whilst half expect their overall financial outlook to deteriorate.
Overall, the survey paints a troubling picture of a sector making painful choices about staffing, services and sustainability, precisely when demand for charitable support remains high. Without relief or increased funding, many organisations warn they will be forced to shrink activities, shifting more burden onto already stretched local authorities and the communities who depend on charitable support.
CFG’s co-CEO, Clare Mills comments: “One year on from the Chancellor’s announcement, it is clear that many charities are struggling to cope with the increase in costs. The rise in Employer National Insurance Contributions came at a time when the sector was already struggling with a cost of living crisis, and resulting increase in demand for their services.
“Charity leaders will now be facing difficult decisions about how to keep the lights on, with many having to make staff redundant, freeze or reduce salaries as well as cutting back on the services they can provide.
“Ultimately, it is the people who rely on services provided by these charities – often the most vulnerable in our society – who will pay the price if charities are forced to cut costs, or close altogether.
“With the autumn budget coming up next week, we remind the government to acknowledge the vital contribution that charities make to the country, especially through supporting local authorities and wider public services. Increased support for the sector would go a long way in enabling charities to help the government tackle some of the key issues in our society.”
Read the full report: ‘How charities are coping one year after the ERNICS rise’
« Back to all news