For six years, the UK charity sector has been in near continuous crisis and now, we potentially face a sector wide crisis triggered by the deepening Gulf conflict.
Our Charity Excellence fundraising resilience data showed that during Covid, the sector hit bottom in April 2020 but had recovered by July. The cost-of-living crisis in late 2022, was both much deeper and longer. Then in September 2023, we published our £1bn Government Funding Cut report, which warned that huge reductions in charity funding risked a further crash.
A month later, the crash arrived. This time, we saw something that had not happened before: fundraising did not fully recover and, instead, stabilised at a lower level. Fundraising follows economic downturns and recovery but this third crisis was created by government funding cuts, which were never restored.
Six years of crisis have left the sector in an incredibly fragile state – each recovery takes longer, and the last has left us far weaker too. Our front-line charities may be run by angels but they cannot create miracles from nothing – they are exhausted and lack the minimum resources they need to get the job done.
Against that backdrop, the emerging Gulf conflict could introduce a new and deeply destabilising shock. If it escalates further or is prolonged, it may well deliver a “triple blow” of falling real-term income, increased demand for services, and rising operating costs.
Growing income pressure
The recent CAF UK Giving Report shows that public donations fell to £14bn in 2025 (£15.4bn in 2024), the first decline since 2021. With energy price-driven inflation likely to rise, consumer confidence and disposable income will come under further pressure, posing a risk of a deeper fall in giving. If the crisis results in an economic downturn, that will also impact most fundraising income streams.
Compounding this is the risk to government charity funding. Rising gilt yields and inflation-driven increases in public spending obligations raise the likelihood of more cuts to departmental budgets, mirroring what happened in 2023. The Institute for Fiscal Studies has said that the crisis could increase government spending pressures by up to £20bn.
Demand rising again
During the cost-of-living crisis, demand for charity services surged to historic highs and never returned to pre-crisis levels. The current energy price rises and inflation will hit low income households hardest, driving even greater need, particularly for charities focused on food insecurity, debt and welfare advice, poverty relief, and mental health.
Charity operating costs are likely to rise again. Those able to meet the rise in demand will incur additional costs in doing so and, overall, costs will increase for everyone. However, the impact of increasing temperatures and longer daylight hours will mitigate the impact of growing energy costs, until the autumn.
A fourth major crisis?
As someone who served in the Gulf during the first conflict, this war feels even more dangerous and I’m uncomfortable with it being glorified by some. We have a two-minute silence for a reason.
For UK charities, our analysis indicates that, if the conflict escalates further or is prolonged, the probability of a fourth sector-wide crisis is very high, it could be even deeper than the last one and recovery would almost certainly take longer – maybe 2027.
However, I still think that uneven deterioration would be more likely than a tipping point that takes down the sector, but it would almost certainly accelerate the rate of charity closures and could result in localised tipping points in subsectors and local ecosystems; service deserts.
This is not inevitable but we must change from dialogue and commitments to action. We need real collaboration between all sector bodies to create and then deliver a robust strategy for recovery that is ruthlessly focused on supporting our front-line charities, particularly our small charities. They represent 95% of the sector but struggle far more than larger charities to access support and funding.
We also need a government that owns its ambitions for the sector and delivers on its promises of meaningful collaboration and investment. Don’t celebrate the new covenant – make it work. There are 14 million people in the charity sector who have a vote. We are not powerless, unless we allow ourselves to be.
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