Like all of us, charity leaders have had to become used to expecting the unexpected, particularly so when it comes to considering managing their organisation’s finances.
There was cautious optimism at the start of 2026 that we would see an easing of the turbulence of recent years, with the IMF recently upgrading its forecast for UK GDP growth from 0.8% to 1%. However, wider geopolitical events have put further pressure on charity balance sheets.
Fuel costs have risen to their highest levels since November 2022, supply chain disruption looks set to push up the prices of other essential goods, government borrowing costs have increased, and additional price rises are likely to follow later this year.
In response, the Bank of England is now expected to hold interest rates for longer than had been expected. Having been held again in June, the base rate is now likely to remain at 3.75% for much of the rest of 2026 to counteract inflationary pressures.
Resilience
Against this ever more challenging backdrop, I have continued to be struck by charities’ remarkable resilience.
In continuing to deliver essential support to the people and communities that need them most, our sector has demonstrated the necessary determination and ability to navigate the times we are facing.
Of course, there are no easy fixes to these global problems. It will take time for their impacts to manifest fully, but this presents charities with a vital window to prepare.
By putting strategies in place to withstand the full effect of future economic shocks, charities can put themselves in the best possible position to continue delivering essential services.
Planning for a range of potential scenarios is key. By understanding your cost base in detail, and knowing where cuts could be made if income were to fall or essential costs continue to rise, will provide necessary confidence to withstand financial challenges.
Re-evaluating a charity’s mission and adapting to meet today’s challenges can also help organisations to prepare.
Disability charity Sense has announced the closure of some of its programmes to ensure that it can continue to deliver those that provide the greatest impact, while the British Heart Foundation recently announced that it will be scaling back its shops estate in response to a difficult trading environment.
Investing in operations
While many will feel they have already cut as much as they can, further re-evaluation of long-term spending needs can also help charities to identify reserves they can utilise to support their mission.
Placing any cash reserves a charity has in medium or long-term savings accounts can help to protect and grow their value.
Investing in operations can also support financial resilience. For instance, Care International UK, has invested in its fundraising, multi-year initiatives, and communications, to further diversify its income and provide greater certainty over longer-term finances. This has enabled them to lower their overheads and achieve a 38% increase in restricted funds.
In some circumstances, it may be sensible for organisations to consider a potential merger as a way to reduce overheads and share resources. The most recent Good Merger Index found that there were 94 mergers across the sector in 2024-25, a 49% increase on the previous year.
This trend seems to have continued into 2026, with new mergers announced by care, health, and education charities. One notable example is the merger of Lewes House of Friendship and Age UK East Sussex, with both organisations citing greater resilience and sharing of expertise as key motivations for the change.
The coming months may be unpredictable, but with the right strategies in place, and a determined outlook, UK charities can help to safeguard their finances and support those who depend on them.
