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Coronavirus

The sky is falling in

Caron Bradshaw reflects on what the most recent research on the financial impact of Covid-19 on charities is telling us and concludes that far from crying wolf, the wolf is at the door and it's time to shout about it.

Post byCaron Bradshaw

Last week I highlighted the disparity in support for the sector.

£585m for a single company. £750m for all of us.

The problem is apparently data. The Government is not convinced we’re a ‘special case’ for more support. So we continue to try and make the case.

In March, as part of the coalition of infrastructure bodies, we estimated a c £4bn loss over 12 weeks. Last week the Guardian featured ProBono Economics’ tracker data, which starkly found that one in ten respondents faced potential collapse by December. Its estimate (c £6bn loss over 6 months) broadly supported that earlier data. This week the results from our survey (with PWC, CIoF and NCVO) showed significant financial impact from COVID19 - we estimate a total loss of £12bn for the year. Again broadly in line. None of this data on its own provides a statistically robust, cast iron figure of the cost. Taken together, with anecdotal evidence, it forms a picture of the sector’s plight.

A thoughtful piece by an advocate of the sector, Prof Tony Chapman of Durham University, challenged whether these figures overstate the problem. There are also some green shoots, like the reopening of shops, where early signs are encouraging. So are we in danger of erroneously shouting ‘the sky is falling down’? Are we undermining our credibility and, to mix my fables, crying wolf? My firm and increasingly impatient response is NO!

CFG has built a reputation for being measured and evidenced based. We cannot afford to make critical decisions on dodgy data but risk management is not a numbers game - it is about understanding a blend of information from hard fact to intuition, and making decisions which maximise the good and minimise the bad at the right pace.

This is not the time for perfect data - we need ‘good enough’ information at speed.

The sector spans a vast group of organisations of wildly different sizes, areas of activity and business models. It’s very top heavy, with just under 7% of charities generating over 90% of income. Hundreds of thousands of community based and entirely voluntary organisations (whether registered charities or not) actively glue their communities together, often in the most challenging of circumstances, and on a shoe string. Relatively modest sums avert disaster. Reduced income is not, therefore, the only determinant for survival in our diverse sector. For c50% of charities with income under £50,000 their future is tied not to money but to volunteers and most will fight their way through the crisis.

Expanding the sample to include those with income under £500,000 accounts for just under 90% the sector. For these the government’s package and funding via local community foundations, the National Lottery Community Fund (NLCF), and other grant makers all offer lifelines. That is not to say that their futures are certain, because we know that demand has way outstripped funds, but rather the percentage of those facing collapse is probably low.

Let’s consider big charities. With RSPCA announcing the potential redundancy of a fifth of its work force, CRUK sharing that it faced £120m loss over 12 weeks and Leonard Cheshire experiencing a £20m funding gap fuelled by demand– their plight is clear, though collapse unlikely. They will cut their coats according to their cloth and the impact on research, vaccines, cancer, education, advice, support and protecting the vulnerable, and more will be massive and will extend for years.

In the mid-sized charities the threat of bankruptcy is greatest. And even here the risk of collapse will be avoided by many as they fight to survive, by reducing services, cutting the costs of overheads, de-investing, relocating and redundancies.

The Charity Commission may not be inundated with serious incident reports but this isn’t conclusive evidence that widespread economic distress isn’t a fact - it’s indicative that charities are doing their damndest to keep their heads above water. Most will succeed.

Lessons can be taken from previous economic catastrophes. In the aftermath of the banking crash charities showed resilience, that they could diversify , adapt and use their reserves. We know charities throw everything and the kitchen sink at survival so that they can continue to serve but the effects of financial disaster last for years and were still being felt going into this pandemic.

Charities tend to experience recovery not ‘bounce back’ and we should not take false hope from 2008. Back then income across nearly all sources did not stop overnight and not every aspect of the economy was so badly hit. This time round there will be mass redundancy and rising unemployment in the sector. Quietly behind the scenes there is also that little matter of Brexit! This time the situation is worthy of the term ‘crisis’.

As is clear from the Almanac; expenditure rarely outstrips income, so less income means less activity. Billlions less. However ‘out’ you think that figure is I can say with 100% certainty that it’s far bigger than the £750m package. I’m grateful. But months in government is still saying it cannot save all charities. It’s not listening. So I’m now raising my voice. IT’S NOT ABOUT US, IT’S ABOUT OUR BENEFICIARIES.

We know that the government will listen when the public get behind a case - so I urge you to make some noise. Demand that government looks at the bigger picture and acts. Visit our NeverMoreNeeded campaign website at www.nmn.org.uk and write to your local MP and urge your supporters to do the same. Whilst it wrings its hands and complains it is yet to be convinced of the business case, people’s lives are being damaged. If you are angry that a private entity for private benefit can be given nearly 80% of the sum made available for 170,000 public benefit entities, speak up.

We may be just about collectively propping up the sky but, YES, it is bloody well falling in! Unlike the children’s story this isn’t going to turn out to be an insignificant little acorn.

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