Employment services charities worse off since EU funding loss, report says

23 Apr 2024 News

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Most employment services charities have reported a reduction in funding since money from the European Social Fund (ESF) was phased out last year, according to new research.

Three-quarters of charities responding to a recent survey said they had received less funding since ESF ended and had not been made up by other sources such as the UK Shared Prosperity Fund (UKSPF).

Of these, almost three in five had experienced “very significant” reductions in funding since then and over a third said it was “quite significant”. 

Around four in 10 organisations said they had dismissed staff in the past year, while around one in seven considered themselves at risk of closure in the next 12 months. 

Reduction in services

The Employment Related Services Association (ERSA) and De Monfort University surveyed 64 third-sector organisations providing employment and skills support in the UK to understand the impact of the loss of ESF on the sector. 

Most respondents to the survey said they expected that transitioning away from ESF would have negative consequences on their organisations and users.

Three-quarters reported that they might offer fewer services and support fewer people as a result, lowering “the likelihood of those in long-term unemployment with complex needs entering paid work”.

Most said the new funding context would result in staff redundancies and nearly half said it would lead to fewer staff hours.

Among respondents who had not laid off employees yet, four in 10 expected to do so in the next two years because of funding shortfalls. 

Some respondents also cited concerns around the end of UKSPF in March 2025 and cash-strapped local authorities using the funding to support their own employment support services.  

‘Clarity’ needed on UKSPF’s future

De Montfort University professor Jonathan Payne said: “The third sector plays a vital role in supporting some of the most vulnerable in society to take the steps needed to progress towards jobs or training that they want to do and which fits with their life circumstances. 

“It’s vital that government acts quickly to provide clarity on the future of UKSPF to avoid another cliff edge occurring next March and puts in place long-term funding that can stabilise the sector and prevent the further loss of experienced support workers.”

ERSA chief executive Elizabeth Taylor said: “UKSPF has failed to replace the funding that came from Europe for employment support.

“Projects that delivered employment support services for those most disadvantaged in the labour market have diminished, the impact of this is bad for people, employers, the economy, and local communities. 

“There must be an extension of the current UKSPF allocation, and clear guidelines for people and skills going forward. Let’s fix this for the future of Britain’s workforce and local economies.”

ESF is a former EU funding pot that was part of the European Structural and Investment Funds which provided on average £2bn a year between 2014 and 2020.  

Following the UK’s exit from the EU, ESF was phased out last year and replaced by the government’s UKSPF, which runs from April 2022 to March 2025 and provides a total of £2.6bn. 

UKSPF is delivered through local and combined authorities who have responsibility for commissioning across three local priorities, namely communities and place, support for local businesses and people and skills.

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