Nearly four in 10 Scottish charities are now operating with a budget deficit, according to a new report by the Scottish Council for Voluntary Organisations (SCVO).
Today, SCVO published the findings from the 10th wave of the Scottish third-sector tracker, which draws on responses from 326 organisations surveyed between February and March.
The tracker asks respondents questions concerning their organisational challenges, demand for their services, paid staff and volunteers and financial health.
It found that most Scottish charities (93%) have been facing challenges since autumn 2024, including rising costs and inflation, uncertainty about the future, difficulty fundraising and financial or cash flow constraints.
Essential services at risk
The report shows that 81% of respondents are now facing financial-related challenges, a 10% increase since spring 2023.
Just over four in 10 reported using financial reserves, while 19% cancelled or deferred planned work.
Some 60% said rising costs had a “moderate” or “significant impact” on service delivery.
On staffing challenges, one in five reported cancelling or postponing recruitment, with 11% making redundancies.
The report also shows that fewer organisations are hiring new staff, increasing salaries or promoting staff compared with autumn 2024.
Meanwhile, over half had difficulty recruiting volunteers and 40% cited retention challenges, mostly as a result of falling applicant numbers, a lack of time and volunteer burnout.
Over half said their current use of reserves is unsustainable, a 14% increase since autumn 2024.
Only 13% had full 2025-26 funding confirmed at the time of the survey, while 36% had none confirmed and 45% had partial confirmation.
Separate research also published today by SCVO reveals that while financial insecurity remains a top concern, “the sector has demonstrated strong adaptive resilience”.
It says most organisations have maintained or exceeded service delivery plans since mid-2022, with around 90% believing they will still be operating in 12 months.
Impact of challenges ‘increasing much faster’
Anna Fowlie, chief executive of the SCVO, said: “Financial concerns have been prevalent in the voluntary sector for some time, but the impacts that we’re starting to see in terms of service closures and redundancies are increasing much faster than before.
“We’re calling on funders, including the Scottish Government, to recognise the scale and the impact of these financial difficulties before it is too late.”
Fowlie said that while SCVO and its members have welcomed the Scottish Government’s commitment to fairer funding for the sector, “progress has been frustratingly slow”.
“Scotland’s 46,500 voluntary organisations are integral to delivering the Scottish Government’s priorities, and all parts of government must be empowered and encouraged to properly invest in the sector.”
Mental health charity closure
The call for financial backing came as SCVO’s Third Force News reported that Saheliya, a mental health and wellbeing support charity working with women experiencing racial inequality in Edinburgh, Glasgow and other parts of Scotland, had “gone bust and is being wound up”.
Earlier this month, Callum Carmichael and Michelle Elliot of FRP Advisory were appointed as joint provisional liquidators to Saheliya.
A spokesperson for FRP Advisory told Civil Society that the appointment follows “a period of significant financial difficulty, including reduced funding and rising operational costs”.
Carmichael said: “Saheliya has made a significant contribution to the lives of many across the central belt of Scotland. Unfortunately, sustained financial pressures meant the charity was no longer able to operate solvently.
“Our focus is now on supporting affected employees through the redundancy claims process and working closely with stakeholders to manage the impact on those who relied on Saheliya’s services.”
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