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Top economists warn of unabated financial pressures facing the charity sector in 2021, as need rises and income continues to fall.

In the latest edition of the monthly Covid Charity Tracker by Pro Bono Economics, in partnership with the Chartered Institute of Fundraising and Charity Finance Group, three quarters (75%) of charities warn they are preparing for next year to bring high levels of demand for their services.

The survey showed the ongoing increase in need stemming both from new people turning to charities for services for the first time and existing service users seeking more support than before. Four in 10 (39%) charities reporting greater demand this year stated it had risen from both groups.

Ian Redding, Development Director of charity Ashford Mediation Services, said:

“It’s going to get worse before it gets better. During the lockdown in spring, the pressure on the communities we serve was building up like a shaken lemonade bottle. Neighbour disputes, family problems and child access issues weren’t resolved. Then once it was released, the top was taken off the bottle and exploded, landing in our laps. And with essential hubs like community centres closed, we’re just not getting the same leads we normally would so we can help nip issues like anti-social behaviour in the bud before it becomes more serious criminal activity.”

Shirley Scotcher, Director of Fundraising and Marketing at DeafBlind UK said:

“We support people with sight and hearing loss and whereas they usually are able to access face to face befrienders or our social groups, many of them are completely isolated now. They’re struggling to access food, prescriptions and it’s affecting mental health. When your hands are your eyes, feeling your way around in a pandemic is incredibly difficult. So our members are coming to us more and more, for advice, support, and just a friendly voice sometimes. Where we were taking 300 calls per month, we are now taking over 1400.”

As charities wrestle with these new pressures, eight in ten (83%) are braced for a continued decline in their income over the next 12 months, relative to their pre-crisis expectations. Just over a third expect their income to decline by more than 25%, while two thirds of charities (69%) think it will take more than a year to return to pre-crisis income levels.

Gary Flowitt, CEO of the Arch-Way project in Halifax, said:

“2021 is going to be challenging. We’ve already had to strip our focus back to real fundamentals. Many of the older people with mental ill health we support live alone, so we have been calling them daily to keep in touch. We would have liked to supply all 70 people we help with mobile tablets to use Skype to keep in touch with each other, but budgets would not allow for more than 25. Looking to next year, we anticipate both the return of existing service users with greater need than before lockdown and an influx of referrals for new service users who have suffered mentally throughout the epidemic.”

Pro Bono Economics, the charity that specialises in research on the social sector, has now warned that the combination of many sources of additional demand and continued fundraising restrictions risks a ‘charity crunch’ next year.

Caron Bradshaw, Chief Executive of Charity Finance Group, said:

“Our communities are struggling with the direct and indirect impact of this pandemic and 2021 is expected to be another difficult year for many. Charities are the backbone of society and have proved their value time and again during this crisis. What Charities offer and deliver is essential to those people who rely on them.

“Our research shows that charities are seeing rising demand from both existing and new beneficiaries, while their capacity to meet that demand is becoming ever more constrained. However, more than two-thirds of charities say they expect it will take at least a year to see income levels return where they were before the crisis and we know it took them over 10 years to recover from the 2008 crash. Relatively modest investment to support charities to meet those demands now could make the difference between permanently losing what they offer – depriving generations to come – and preserving their services.”

Matt Whittaker, CEO of Pro Bono Economics, said:

“Charities have demand for their support coming from every direction, and it shows no signs of dissipating. Challenges that existed before the pandemic have not gone away. The fallout we see today in terms of isolation and mental ill health is expected to continue. Then there are backlogs to tackle, while economic consequences worsen. At a time when resources are diminished, it all adds up to charity crunch where need outweighs the sector’s ability to meet it next year.”

“As the government considers how to soothe the social scars Covid has created, charitable organisations can be a core ingredient of the balm the country needs. But the sector can only play that crucial role if ways are found to urgently inject more resource.”

Daniel Fluskey, Head of Policy and External Affairs at the Chartered Institute of Fundraising, said:

“Once again we are seeing the huge challenges that charities face in being able to meet need and demand. 9 months into the pandemic things are not getting any easier, and while charities have cut costs and made savings wherever possible, too many are simply now running on empty. It’s a matter of time before we lose some charity services, or organisations, for good. The research shows that there are multiple and overlapping demands - no charity is the same as any other - so we need appropriate support from Government that can help charity services continue for the people and communities that need them, and for the benefit of us all.”

In today’s new report, Pro Bono Economics identifies five interconnected fronts of demand that charities have seen increase since the onset of the coronavirus pandemic. The report found:

1. Pre-pandemic problems: A majority of charities reported experiencing long-term rising demand for their services the year before the pandemic. Many of the trends charities were responding to, such as homelessness and housing insecurity, have been intensified as a result of Covid-19.
   
   
2. Direct Covid consequences: The onset of the pandemic and lockdowns caused an abrupt increase in and expansion of demand, such as for technology to tackle loneliness and for support with mental health. This resulted in an immediate strain on many charities’ resources, such as for DeafBlind UK.
   
   
3. Build-ups and backlogs: Social distancing has been the second biggest barrier to charities achieving their objectives through the crisis, after finances. A quarter (27%) of charities have cancelled services this year because they or their users didn’t have the skills or technology needed. These gaps have meant some need has gone unmet and meant opportunities to tackle issues at their onset have been missed. Charities providing health care report people coming to them in more advanced stages of illness having missed diagnoses during lockdown, while charities such as Ashford Mediation Services report referrals at more serious levels of family breakdown as a result of a lack of early intervention.
   
   
4. Crisis spillover effects: The ongoing and accelerating knock on demand resulting from the worsening economic situation continues to put pressure on a range of organisations from foodbanks to domestic violence charities, including the Arch-Way project in Halifax.
   
   
5. Shrinking supply: With around 10% of charities warning they’re at risk of closure, some charities anticipate extra demand will be transferred to them when other services fold.

Read the full report here.

Key findings:

Table 1. Roughly what impact do you expect Covid-19 to have on demand for your organisation's services in the next 12 months relative to your pre-crisis expectations?
6 month forward look May-June and August, 12 month forward look November

Note: PBE Covid Charity Tracker, 9-15 November (n = 216), 03-07 August (n = 425), and average of surveys in May/June (cumulative responses 676). May/June and August questions relate to "next six months", November relates to "next twelve months". Residual is no impact.

Table 2. In the last six months, has any increase in demand for your services as a result of the Covid crisis been from existing clients needing more help, or an expanding group of clients needing help?

Note: PBE Covid Charity Tracker, 9-15 November (n = 216) of which 83 are smaller, 132 are larger and 1 unknown size.

Table 3. What impact do you expect Covid-19 to have on your organisation’s income over the next 12 months, relative to your pre-crisis expectations?

6 month forward look in May-June, financial year forward look in August, 12 month forward look in November

Note: PBE Covid Charity Tracker, 9-15 November (n = 216), 03-07 August (n = 455), and average of surveys in May/June (cumulative responses 1,727). May-June questions relate to "next six months", August to "this financial year", and November to "next twelve months".

Table 5. How long do you expect it will take your organisation to return to pre-crisis income levels?

Note: PBE Covid Charity Tracker, 9-15 November (n = 216), 03-07 August (n = 455).

23 November 2020

Notes to editors:

• The November 2020 PBE Covid Charity Tracker was conducted between 9 and 15 November. 216 charities responded to the survey.
• Stats on pre-crisis demand for charities can be found here.
• Stats on cancelled services as a result of skills and technology needs can be found in the Charity Digital Skills Report 2020.
• Stats on 10% of charities warning they’re at risk of closure can be found here.

About Pro Bono Economics:

PBE is a research charity that uses economics to support the social sector and to increase wellbeing across the UK. It combines project work for individual not-for-profits and social enterprises with policy research that can drive systemic change.

About Charity Finance Group:

Charity Finance Group (CFG) is the charity that inspires a financially confident, dynamic and trustworthy charity sector. We do this by championing best practice, nurturing leadership and influencing policy makers.

About the Chartered Institute of Fundraising:

The Chartered Institute of Fundraising is the professional membership body for UK fundraising. We support fundraisers through leadership and representation; best practice and compliance; education and networking; and we champion and promote fundraising as a career choice. We have over 6,000 individual members and over 600 organisational members who raise more than £10 billion in income for good causes every year.

For further information, please contact:

SENSO Communications, Penny Lukats. Tel.: 07775992350.

Follow Pro Bono Economics at (@ProBonoEcon) and Matt Whittaker (@MattWhittakerPB) on Twitter.

Emma Abbott, Communications Manager, CFG. Tel.: 07815189897.