Charities are likely to continue to face an environment of reduced public funding and rising poverty among beneficiaries well into the next Parliament, according to an NCVO report published today.

But it also says that there is considerable optimism in the sector among leaders who believe that there are many potential opportunities for the sector.

The report, The Road Ahead 2014, looks at the political, economic, social and technological drivers which could affect charities over the coming years. It says that charities are looking at changing their business models in the face of funding changes.

“Our data suggests that rising need and rising costs have been a problem for the sector,” says the opening section of the report, written by Karl Wilding, director of public policy at NCVO (pictured). “Independent analysts conclude that public spending reductions will continue into the next Parliament, while longer term, demographic change is adding pressure onto public spending.

“It may well be that these individual weak signals, collectively, are showing that voluntary organisations are thinking more radically about their resources and business model as it becomes clearer that changes in the operating environment are more permanent than temporary.”

The report highlights “a long-term shift from what might be called a ‘funding economy’ of grants and donations, to a ‘financing economy’ of purchasing, contracts and social investment”, and it says the next few years could see a movement away from fundraising as a source of income.

“Charitable giving – and fundraising – are clearly alive and well,” the report says. “Yet there are arguably weak signals that the sector is shifting from funding to what has been termed ‘resource-raising’: reliance upon a wider range of non-cash inputs, including donated goods and, of course, volunteering. The latter includes greater interest from business in supporting the sector more effectively, such as through employer-supported volunteering.”

The report also looks at concerns that the sector’s independence is under attack, as well as questioning the role of the sector in campaigning as individuals find it easier to come together in informal online movements.

“Technology drivers seem to shape almost every aspect of voluntary organisations and volunteering,” the report says. “The shift of routine public services to online, the rise of social networks and digital activism, and the relentless, incremental rise of digital money are at the heart of so much of what the sector does.”

However it says that while the sector faces difficulties there are also many leaders in the sector who are responding optimistically to the future.

“What just might characterise these responses is an attitude that only we, the voluntary sector, are in control of our destiny; that we are confident about who we are and the value we bring to society; and that we need to stop defining everything we do by our relationship with the state,” the report says.

“Maybe the response we increasingly need to these challenging trends is a form of militant optimism: confidence that we can be a stronger voice for those left even further behind in an unequal society; confidence that voluntary organisations are widely trusted; confidence that a majority still support charities voluntarily with their time and money; and confidence that we make a difference, and that we can evidence and communicate our impact.”