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Economic Outlook: Be active in trimming sails

01 Nov 2023 Expert insight

By alexandarilich / Adobe

This content has been supplied by a commercial partner.

There continues to be a real sense of ongoing pressures for many charity trustees and leaders. “Firefighting” is a word that is often used, as charities navigate their immediate challenges and priorities. The economic outlook shows that this is unlikely to ease in a meaningful way over the near term.

The latest UK gross domestic product (GDP) data from the Office for National Statistics (ONS) shows that output increased by 0.2% quarter-on-quarter in Q2 2023, and growth in Q1 2023 was revised upwards from 0.1% to 0.3%. The overall picture is that of a flatlining economy, with an expectation that UK growth will remain sluggish.

The ONS also reported that headline inflation has remained unchanged to September 2023, with consumer prices index (CPI) inflation staying at 6.7%. There is optimism that inflation will halve in line with the government’s target and be under 5% by the end of the year. In light of this, it also seems likely that the Bank of England will keep interest rates on hold at 5.25%.

Annual growth in regular pay fell from 7.9% to 7.8% in the three months to August 2023. In the underlying data there were more signs that pay growth is softening. The overall pace of increases in pay is slowing. The latest vacancies data also provides further evidence that the labour market is loosening.

Ongoing process

Even though charities may not be able to control the wind, many are being active in trimming their sails to respond to the environment and circumstances they face. Irrespective of the headwinds, and in some instances tailwinds, there is an acknowledgement that doing nothing is unlikely to be the right answer. Most importantly, adjusting to the prevailing conditions is not something which is done once – it is an ongoing process of continuously responding to internal and external factors.

Traditionally, one option when responding to additional challenges would be to increase headcount of staff. This is not always sustainable and there is now a greater emphasis on stepping back and holistically reviewing or streamlining existing processes and examining organisational culture. There is increasingly a move to a mindset of trying to do things differently as opposed to doing more of the same. This is seen in investments around transformation; thinking about how impact can be achieved in a more efficient and effective way. Within this, technology also has a part to play, although the implementation of systems, as well as the behavioural and cultural change needed to go alongside it, should not be underestimated. In these shifts, charities should ensure that their charitable purpose continues to be their north star.

Daniel Chan is a director at PwC 

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