Two-thirds of charity leaders believe that the charity sector is “unhealthy”, as demand for services continues to rise, according to a new report.
Today, the Charities Aid Foundation (CAF) published the UK Charity Insights report, one of 16 country-specific reports that form part of its World Giving Report series.
The report, which is based on responses from 549 charities collected between 6 May and 9 June, finds that 30% of charity leaders think that the sector is in good health.
Conversely, 66% of leaders said that the sector is “unhealthy”, with many citing financial pressures and funding cuts.
The report indicates that demand continues to rise for many charities, with nearly half of respondents saying it has increased “a lot” over the past 12 months, and most expecting it to increase in the coming year.
Funding tops list of concerns
Most charity leaders named funding as a top concern, with 79% citing at least one finance-related challenge (achieving financial sustainability, increased competition for funding or the balance between restricted and unrestricted funding).
Nearly as many respondents (77%) highlighted operational concerns, with increasing costs specifically cited by 44% of respondents.
Increasing costs have become a more prominent concern in recent years, according to CAF’s report, with a third of charity leaders noting it last year and 14% before peak inflation in 2021.
A large London-based disability charity is quoted in the report as saying: “There’s the assumption that money is available and that charities are just not looking hard enough for it.
“At the local level, it’s extremely difficult without the support of the local authority.”
Meanwhile, a medium-sized charity in the East Midlands is quoted as saying: “The funding environment is becoming increasingly competitive.
“While statutory services have been dramatically cut. Too much is expected without much light at the end of the tunnel.”
CAF asked charity leaders whether their income streams were diverse enough to cope with a sudden decrease in one.
It found that most charities (52%) were not confident they could cope with the sudden decline of an income stream, rising to 63% of small charities with incomes under £250,000.
Scottish charities were less confident (66%) than those in England (47%).
Relationship with government
Charity leaders reported spending an average of 70% of their time firefighting problems and 30% on strategic thinking, planning and making connections for the longer term.
Leaders who reported having a strong team, “with the right people in the right roles”, said they spent more time on strategic thinking and less time on firefighting than those who did not (32% versus 23% of time spent planning).
On external awareness and networks, most respondents agreed that the government “makes life difficult” for the sector.
The report says that this is partly due to government funding models often not lending themselves to the long-term security that charities seek.
Overall, 6% of respondents said they felt that the government has a positive influence on the sector.
A medium-sized Scottish charity is quoted as saying: “Local charities cannot be funded [only] by public donations and there’s a need for government core multi-year funding, particularly in the health, social care and welfare sectors.
“This needs a recognition that the sector has a bigger role to play in prevention and early intervention-type services than is currently ‘permitted’.”
Recruitment and retention challenges
Most charity leaders said they struggle with employee and volunteer recruitment, with 72% of respondents finding it challenging to recruit the right people.
In addition, 34% of respondents said they are struggling with staff retention, while 48% reported finding it challenging to manage staff wellbeing.
The report says rising costs are having a direct impact on staffing levels and wellbeing.
“Many organisations report that increased costs force them to reduce their workforce, limit pay increases, or rely on underpaid or minimum wage workers, which affects morale and service quality,” it reads.
It adds that “there’s a strong desire to expand teams, improve pay, and invest in people development to enhance service delivery, but many responses highlighted that short-term or project-based funding undermines these efforts, making it difficult to meet growing service demands”.
“Charities are looking for greater recognition from funders of the true costs of staffing, including fair pay.”
