Economic Outlook: Amid rays of sunshine, choppy seas continue

01 Sep 2023 In-depth

By Cameo / Adobe

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The summer is a time when a number of charities reevaluate their financial forecasts as the year progresses. However, for some, these have posed more questions than answers.

Many trustees and leaders continue to plan for further downside scenarios. Indications from the corporate world include the highest quarterly number of company insolvencies since 2009.

Particularly in this context, it is no surprise that trustees generally continue to be cautious around managing charity funds and their approach to spending, consistent with the trustee research on charities published this year by the Charity Commission. Nevertheless, it is also important for charities to consider how to invest for the future.

Economic pressures

The Office for National Statistics (ONS) reported that inflation has continued to follow a downward trend in the year to July 2023, with Consumer Price Index (CPI) inflation falling to 6.8%, principally due to lower gas and electricity prices. However, with inflation expected to return to the 2% target level only in 2025, we will likely see further interest rate rises beyond the Bank of England’s interest rate of 5.25% announced in August 2023. This may dampen growth expectations.

PwC’s UK Workforce Hopes and Fears Survey 2023 found that 23% of UK employees say they plan to switch jobs in the next 12 months - up five percentage points from last year. This inevitably brings pay and reward into focus, and the ONS growth in regular pay (excluding bonuses) was 7.8% in April to June 2023, continuing an upward trend and the highest regular annual growth rate. At the same time, wider factors, such as ways of working, culture and opportunities for progression, also remain important. Workers seeking a new employer were less likely to report having autonomy and feeling their work has meaning. These should play to the strengths of the charity sector, and are areas which charities can reinforce.

Pressures from the cost-of-living crisis can incentivise people to take risks, which is likely to lead to an increase in fraud in the coming period. Estimates from the recent ONS Crime Survey for England and Wales for the year ended March 2023 showed that there were 3.5 million fraud offences. This provides a timely reminder that there must be vigilance and appropriate defences put into place. There is an ongoing focus on counter-fraud activity, and this should be no different for charities.

The weather in the UK this summer has been relatively changeable. The outlook for many charities has not been dissimilar - amid rays of sunshine, choppy seas continue.

Daniel Chan is a director at PwC 


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