A country is usually said to be in a recession after two successive quarters of negative economic growth. The UK has officially been in the current recession since the second quarter of 2008, the longest recession since World War II. The Confederation of British Industry predicts that unemployment is forecast to rise to three million (9.4 per cent) in 2010.
A recession can affect charities in various ways; voluntary income drops as people have less disposable income to spend, funding from trusts and foundations reduces as their endowments lose some of their value, and those reliant on statutory funding can fall victim to public spending cuts. At the same time, some charities experience rising demand for their services, especially those in the advice and employment training sectors.
However, it must be emphasised that not all charities experience reduced income or increased demand – the sector is so diverse that different types of organisation tend to be affected in many different ways.
Most charities expect the near future to hold further drops in income, but anxiety over cashflow has lessened as the recession came to a close.
Investors will not much mourn the passing of the last decade, says Guy Davies.
The charity sector is in a “phoney war” in terms of the true impact of the recession, according to a report from the Charity Commission on how trusts and foundations are responding to the economic downturn.
Charities which lost deposits following the 2008 collapse of Icelandic bank Kaupthing Singer and Friedlander could recover up to 70 per cent of funds over the next couple of years, according to Dominic Sullivan, Cats Protection’s director of legal services.
Half of UK charities say their income has not changed in the past year, while a further 30 per cent have experienced a drop of less than 10 per cent , according a new survey by accountants Baker Tilly.
This time last year the idea of reaching the end of 2009 in more or less one piece seemed far-fetched. The world’s financial infrastructure was collapsing around us, previously inconceivably large shocks became commonplace, even daily, experiences and a vortex of debt threatened spiralling doom to our entire system.
Christian book and bible charity IBS-STL UK is looking to sell all its operations and wind itself up after the implementation of a new IT system went badly wrong and capped off a succession of financial problems. It is the first time in recent history that a top-250 charity has chosen to wind up.
The recession has put risk management systems through a severe test, says Richard Weighell. The latest PKF/CFDG annual risk management survey, Managing Risk – keeping in control was carried out between May and June 2009. The number of participants in the survey was the highest yet at 466, and finance directors were very much at the forefront of those submitting the responses.
One good thing about a near-death experience is that it is usually followed by a sense of euphoria arising from the knowledge that you have survived and that your worst fears did not come to pass. This slightly giddy joy is putting a youthful, carefree smile on the face of many in the City at the moment, hugely relieved as they are that the terrifying apparition of economic devastation staring us in the face in March has turned out to be just a particularly frightening Halloween mask after all.
Forthcoming government cuts in public spending will be as high as cuts made in the recession of the 1970s, Robert Chote, director of the Institute for Fiscal Studies warned charity finance leaders earlier this week. Speaking at the Charity Finance Live conference about the state of the UK economy over the next five years, Chote said the government had implied a cut in spending by 3 per cent a year in real terms from 2010. Over three years this would result in around £33bn in savings.
The Scottish government has launched a £1.7m resilience fund to assist charities affected by the recession.
Triodos Bank has increased lending to charities and social enterprises by 33 per cent in the first half of 2009, taking its total lending and commitments to civil society to £150m. The largest growth area was social housing. Overall the ethical bank showed a 29 per cent increase in total UK lending and commitments in the first half of 2009 to £305m.
With government finances shot to pieces by the economic crisis, it is clear there will be a shortage of public cash available for charities in the near and medium term. This will have a negative impact on many charities but the likelihood is that it will affect small and medium-sized charities (SMCs) more than very large or very small charities.
The dividend paid by Oxford University Press to its parent charity, Oxford University, has almost doubled this year to £100m. In a clear sign that the recession has not affected the printing arm at all, it is to pass over £100.7m on the back of profits up 6 per cent this year to £88.7m.
Charity shops have defied the recession and increased their profits by 4.1 per cent, according to the Charity Shops Survey 2009, which is sponsored by accountants BDO Stoy Hayward. While the gross income of the 69 shop chains in the sample fell by 3.1 per cent to £526.1m, their costs fell even further, by 4.9 per cent to £414.6m, leaving a collective profit of £111.5m. Charity shops have now increased their profits for the past four years, and in eight of the last 11.
Charities who lost deposits in Icelandic bank Kaupthing Singer and Friedlander have got back 20 per cent of their lost funds from the administrators. A Cats Protection spokesman told Charity News Alert: “As far as we are aware the administrators of Kaupthing Singer and Friedlander paid out 20p in the pound to all charities on the same day.”
A 15-year-old charity chaired by child development expert and author Elizabeth Hartley-Brewer has gone into administration after failing to secure enough funding to see it through the summer. School Councils UK, which promoted pupil participation in the running of schools, put itself into the hands of administrators on 17 July after the trustees opted not to personally underwrite the financial position. Ten staff have lost their jobs since May.
Credit rating agencies and certain parts of auditing businesses should become not-for- profit, according to Stephen Lloyd, senior partner at Bates Wells & Braithwaite. In a colourful lecture to charity experts yesterday entitled Capitalism in Crisis: Lessons from the Not-for-Profit Sector, Lloyd said the recession had uprooted the prevailing view that the voluntary sector needed to learn from the private sector and possibly even turned the tables.
In April, the Association of Charitable Foundations conducted a survey of its members to explore the prospects for grantmaking in the short and longer-term. The results paint a broadly positive picture for charities seeking funding, says David Emerson The recession has hit the stock market hard, and as trusts and foundations have much of their assets in equities, anyone might expect them to have been badly affected.
It’s been a tough time for charity finance directors over the last year and the next 12 months show few signs of respite. Against a backdrop of economic recession, charities are suffering from low or no interest on bank deposits, falling yields on investments and downward pressure on funding sources. As income falls, or at least threatens to, cost control is key according to the findings of our inaugural survey of the finance function.
There’s never a good time for a charity to experience something seriously bad happening, but the current climate makes the timing even worse. Andrew Hind explains. Reputation and funds alike are increasingly precious commodities and, once lost, both can prove extremely challenging to retrieve. But, in the real world, risk can rarely be entirely eliminated and serious incidents are an occasional unfortunate fact of life. Like comedy, the impact of serious incidents are often very much a question of timing – getting to grips with them as early as possible tends to make a significant difference to their outcome.
A CAF Bank survey of 280 charities has revealed that 42 per cent are struggling to deliver services because of the low interest rates.
Redundancies are a fact of life and need to be approached in a fair way says Julian Goulding. Let's be clear. Employers can legally make employees redundant but by the same token employees do not have to accept that they are redundant just because their employer says that is the case.
More than half of the organisations that provide support services to local frontline charities say they are coping very well or fairly well with the recession, despite nearly four in five reporting higher demand for help. The findings were revealed in a survey by Capacitybuilders of local consortia that provide support to other sector groups – the first of four such surveys which will be conducted every six months. They aim to establish how the economic climate is affecting support bodies and whether government funding programmes are targeting the right areas.
Sophie Whitbread examines the legal implications of alternatives to redundancy Many employers are looking ahead and realising that, in order to ensure their businesses can cope when the economy recovers, they need to retain the staff they have worked so hard to recruit and train. They are therefore considering alternatives to redundancy, such as flexible working, sabbaticals and pay cuts. While this is an attractive alternative approach, employers need to be aware that exploring these sorts of options can involve just as many, if not more, legal pitfalls as undertaking a redundancy exercise. So what should you do to ensure you stay on the right side of the law when looking at creative alternatives to redundancy?
The charity sector is undergoing huge challenges right now as a result of the economic downturn. In times like these charities need to be able to focus on their core competencies and maximise efficiencies in the business. Tighter economic conditions prompt many organisations, including charities, to look for ways to reduce costs and outsourcing non-core activities such as payroll is an effective way to improve business efficiency and acquire a competitive advantage through partnering with a specialist provider.
Nearly a thousand charities in the UK shut between 2007 and 2008, according to a Charity Commission report published in March. In May, Russam GMS surveyed over 450 interim managers who work at a senior level in the UK charity sector to understand how the sector was faring in the recession. Of the respondents, 76 per cent reported that income levels have fallen in charities across the UK since the start of the financial crisis, 20 per cent claimed they were stable and just 4 per cent said they had increased. It is clear that a major challenge facing many UK charities is how to cope in light of reduced donations and tougher competition for funding, find new income streams and improve operational efficiencies to save costs. Another challenge highlighted by over half of interim managers was that key business projects have been put on hold, 20 per cent claimed that recruitment efforts have been frozen, 15 per cent said IT investment had been put on the back burner and 10 per cent said that marketing plans had been shelved. On top of that, 74 per cent of interims also said that job cuts had already been made in the organisations in which they worked.
Diane Sim presents the findings of our inaugural survey of the finance function. It’s been a tough time for charity finance directors over the last year and the next 12 months show few signs of respite, according to the findings of Charity Finance’s inaugural survey of the finance function.
Brian Johnson outlines the risks of insolvent trading and examines the signs to watch out for. Charities are feeling the pressure like never before. The credit crunch and subsequent recession has meant both private individuals and companies are giving less, while cutbacks in central Government budgets are also being felt. The 2012 Olympics is another factor impacting the funding available to charities, while, to top it all off, funds already under management have been savaged by global stock market falls.
