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Banker warns credit crunch will squeeze charities from all sides

Fundraising | Celina Ribeiro | 14 Oct 2008

Charities will face decreased income from major donors, trusts and government as the “real recession” begins to take hold, a top investment banker and philanthropist has warned.

John Studzinski (pictured), of the Blackstone Group and a major philanthropist of many years, told an audience of philanthropists and charity representatives assembled in Westminster, that a tough two or three years lie ahead for the third sector.

“The real recession is just around the corner. This is going to be a tough period for charities,” he said, before adding: “I think we can learn a lot and emerge stronger.”

He warned that as foundations face less investment income, their grant-making capacity is likely to be reduced and they will make fewer multi-year commitments. And with decreased tax revenue, he said governments too are likely to reduce spending on social programmes and their support for third sector organisations.

Studinski says amid a sense of insecurity and faced with rising unemployment: “individuals will panic”. However, rather than experiencing an across-the-board drop in income from major individual donors, he expects charities to see “polarized behaviour” among major donors.

Speaking at a Raising Funds From The Rich conference, he said those donors who are attracted to a cause because of glitzy dinners will withdraw their support as society enters a period of austerity. ‘New money’ in particular, he said, “is very nervous” and likely to stop giving. In contrast, he said: "Your very loyal donors will become more loyal, more generous and more committed."

Yet while a support base will remain, Studinski believes charities will be put under pressure from their loyal donors. “In this period there will be pressure on consolidation,” he said before suggesting there is too much overlap in charities’ activities, citing the large number of homeless charities operating in London and the number of cancer charities working in the UK in total. He said many contemporary charities have "lost their focus, and their purpose”

He encouraged charities to build relationships with their loyal donors and focus more on outreach than on fundraising, ensuring that their supporters become ambassadors for the cause. He also called on charities to put more energy into advocacy.

“If charities can be seen as advocates… the fundraising will come – more discreetly, more elegantly but from real supporters and real donors.”

While forecasting a significant level of economic gloom, Studzinski remained hopeful that the market crisis would eventually work to the benefit of charities. “This type of shock to society is sometimes needed,” he said.

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