Charities face 'enormous financial squeeze' according to new survey

12 May 2020 News

Cash flow has worsened at the majority of charities during the last month, according to a new survey.

Some 59% of charities surveyed by ACEVO and the Centre for Mental Health said that the cash flow situation – a key measure of an organisation’s ability to pay its wages and other fixed costs – deteriorated during April.

Seven out of 10 of the charities surveyed said that donations and new business have got worse, and free reserves are worse for 61% charities.

At the same time as experiencing this financial pressure, half of charities reported that they were maintaining the same spending on frontline activities. 20% reported that they were spending more.

One in three charities have seen the number of volunteers fall in the last month.

The results are drawn from a survey of 174 charities, conducted for the first Charity Health Check. Further results will be released each month, allowing the sector to track its financial health as the coronavirus crisis develops.

Financial squeeze

The Charity Health Check also gives the sector a financial health score of 30.8, where 50 would mean no change on the previous month and 100 would mean improvements on every measure.

The charity sector score, which is lower than an equivalent figure for manufacturing in April, shows that voluntary organisations “face an enormous financial squeeze”, according to ACEVO and the Centre for Mental Health.

April’s Manufacturing PMI, a parallel measure, is at a record low of 32.5. 

Cliff edge

Vicky Browning, chief executive of ACEVO, argued that the survey results were further evidence that charities needed further government support during the pandemic.

Browning said: “As we navigate the worst impacts of the outbreak, charities and the essential support they provide is never more needed. I have spoken to members doing whatever they can to continue to provide services while income has fallen off the edge of a cliff.

“The Charity Health Check findings echo this. Charities are experiencing a reduction in cash flow and reserves while maintaining or increasing frontline services. This is not sustainable long-term and demonstrates why further government support is urgently needed if we are to build back better.”

Nick O’Shea, chief economist at Centre for Mental Health said: “The Charity Health Check paints a worrying picture of the sector’s position at this time, and its prospects in the near future. 

“Our analysis of the results suggests that charities across the country are continuing to deliver much-needed help to people during the crisis while facing an uncertain future with diminishing resources.

“From an economic standpoint, this is unsustainable. A rapid financial response is needed to prevent vital support disappearing from people’s lives when they need it the most.” 

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