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Charity merger activity down in 2011, PwC analysis suggests

Governance | Tania Mason | 6 Dec 2011

Charities are not merging with other charities nearly as much as might be expected in the wake of the public spending cuts, new figures from the Charity Commission suggest.

As part of its fifth Managing in a Downturn study of how the sector is coping with the general economic malaise, PricewaterhouseCoopers (PwC) examined whether merger activity is increasing.  A number of commentators have urged charities to consider mergers as a way of preserving services while cutting overhead costs.

However, scrutiny of the Charity Commission’s register of mergers and of the number of charities registered with the Commission overall, suggest that merger has not been a popular response to the public spending cutbacks.

PwC’s analysis shows that far from increasing over the last year, the numbers of mergers recorded on the register of mergers has fallen – from a high of 110 in 2009, to 105 in 2010 and just 80 in 2011. The data has been adjusted to treat ‘groups’ of mergers, so for example all the mergers into Age UK is treated as one merger. The 2011 figure has also been annualised.

Ian Oakley-Smith, a director at PwC, said that while the register of mergers may not record all mergers occurring in the sector, it does provide an indication of the level of merger activity.

“These results do not suggest that mergers are on the increase: indeed, quite the reverse appears to be true,” he said. “While some mergers in 2011 may not yet have been notified to the Commission, there is no obvious evidence that merger activity is increasing and, in any event, the annual number still represents less than 1/1000th of the charities register.”

Overall number of charities

Oakley-Smith also said the figures contained on the Charity Commission’s website for the overall numbers of charities, painted a confusing picture. In the year between 30 September 2010 and 30 September 2011, the period since the Comprehensive Spending Review, the number of charities registered fell by 522, suggesting some degree of consolidation.

However, closer inspection reveals that there was actually an increase of almost 2,000 in the number of charities with income over £10,000, and nearly 2,500 fewer charities with income lower than £10,000. It appears that a sizeable proportion of the smallest charities have grown over the period.

By far the biggest growth was amongst charities with income of £100,000 to £500,000, but there were also a few with income of £500,000 to £5m.

Oakley-Smith added: “Clearly, there is still a long way to go before the number of charities overall reduces materially.

“There is little evidence that the sector has yet fully taken on board the view in many quarters that there are too many charities and consolidation will be a necessary consequence of the reduced income levels already being experienced.”

PwC will publish its fifth Managing in a Downturn report early next year.

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