Donors are cutting back on their regular giving to charities as new figures show direct debit cancellation rates in August reached record highs and experts warn there could be worse to come.
Figures released today by Rapidata show that the direct debit cancellation rate for August reached 4.58 per cent – the highest rate for August since such records began (in 2003) and worse even than in the middle of the recession in 2008 when rates hit 4.4 per cent. A year ago, cancellation rates were significantly lower with August figures levelling out at 3.49 per cent.
August figures suggest a worrying trend on the back of a dramatic increase in direct debit cancellations in the second quarter of 2011. After cancellations settled down in the 2010 calendar year, Rapidata recorded an unexpected spike in May 2011 (reaching 4.1 per cent compared to 2.8 per cent in May 2010) followed by June and July cancellation rates which were slightly lower than May’s but still significantly worse than the previous year. August was the fourth consecutive month that direct debit cancellation rates were above 2010 levels.
The August numbers were classed as “shocking” by Rapidata managing director Scott Gray, who warned that an upward trend for cancellations could be emerging.
“I am deeply concerned to see charity direct debit cancellations increasing again to recession levels and higher. I wouldn’t be surprised to see the rate exceed 5 per cent in September with the trend continuing,” he said.
“Although I was hoping we were seeing a temporary blip it is becoming clear that the trend has shifted once more with our figures reflecting the recent sharp economic downturn and threat of a double-dip recession.”
General increased economic uncertainty may have contributed to the increased tendency of donors to cancel their regular gifts to charities, Rapidata suggested. A survey for the European Commission found that consumer confidence fell in August while the CBI’s regular figures showed retail sales – including on food – fell over the month.
On top of that, concern about the UK’s general growth prospects (the economy grew below expectation at only 0.2 per cent in the second quarter of 2011) might have encouraged donors to look for ways to cut back.
Charities must act to stem the tide
With an apparent negative trend emerging, Gray called on charities to take action.
“Charities should be looking at their current activities and asking whether they are doing everything they can to minimise cancellations and attrition. The increases we’re seeing represent many thousands of pounds of lost donations each month, but also the loss of regular donors. Now is the time to be as proactive as possible.”
