Economic Outlook: Batten down the hatches

01 Dec 2023 Expert insight

By iamchamp/Adobe
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As we come towards the end of 2023, the mood among charity trustees and leaders is generally one of caution when it comes to finances. There continues to be a focus on income and costs, as well as on reserves and liquidity.

PwC’s recent economic outlook shows that the UK economy is expected to grow by around 0.5% in real gross domestic product (GDP) in 2023 and 2024, and is likely to avoid recession.

The Office for National Statistics (ONS) reported that the consumer prices index (CPI) rose by 4.7%, down from 6.7% last month. This is significantly below the peak of 11.1% in October 2023 and below the government’s target for inflation to be under 5% by the end of the year. However, it is unlikely to return to the Bank of England’s inflation target of 2% until 2025.

The ONS also reported that annual growth in regular pay was 7.7% in the three months to September 2023. This paints a similar picture to last month, with vacancies declining, employment down and unemployment up. The indications are that the labour market is gradually cooling, and not collapsing. In addition, wages are growing in real terms, which should alleviate the worst of the squeeze in living standards. The cooling of the labour market would suggest that there may be lower wage growth in due course.

The recent autumn statement had an overall focus on growth and productivity, with an eye to a general election in the coming year. However, there needs to be economy-wide structural changes to enable faster and more sustainable productivity growth.

Charities are underway in their planning for the coming period, particularly as finances remain fragile for some, and an expectation that there will be a continuing increase in the demand for the support offered by charities. The next year is likely to continue to be turbulent. If not already, charities should batten down the hatches and prepare for ongoing financial challenges.

Over recent months, PwC and the Chartered Institute of Fundraising have been hearing from fundraisers about how charities can give themselves the best chance of fundraising success when looking ahead. The report, Learning Forwards: How Well Equipped are Charities to Deal with an Uncertain Future?, shows that fundraising continues to face significant pressures, but opportunities can also come from these challenges.

Big challenges require bold thinking, and a culture of innovation, investing in technology and using data and insight can help in overcoming these. It’s also important to complement this with engaging the next generation and promoting integration across the organisation.

Daniel Chan is a director at PwC

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