Key Factors - The Cost of Living Crisis Is Very Different To Covid
Our predictive model is based on our Covid data, but is forecasting a much deeper and longer impact, and that which charities will be most impacted will vary. These are outlined below, including which charities we believe will be impacted by each.
- Income - we believe this is the single biggest risk, for several reason.
- Charitable Grant Makers. We are seeing crisis funds being launched by community foundations/councils, and some corporate foundations. Mainstream grant makers do not appear to be doing so, although a number are uplifting their grants to mitigate the impact. More positively, at the end of October, the National Lottery announced that they expect to commit over £75m to crisis support through the next year and the National Grid £50m to energy poverty. However, although nobody knows for certain, our estimate of the total funding for the scetror during Covid was £5 billion. We do not belive anything like this will (or even could) be made avaiable.
- Public Donations. About 50% of sector income comes from public donations. There is some evidence this is falling, albeit uncertain. Micro and small charities are the most reliant on public donations.
- Other Fundraising Income. Except for legacy and, possibly retail, we expect all fundraising income streams to come under pressure.
- Inflation - is eating into the real value of fundraising income and whilst this is expected to fall in 2023, that will reduce the rate it is impacting on real fundraising values, not reverse it.
- Government. About 25% of the sector’s income is from public sector contracts, many already at or even below cost. In response to the budget cuts, public bodies may cancel, bring in-house or seek to renegoiate existing contracts. It is the main source of income for about 9% of charities, mainly the much larger ones.
- Cost – inflationary cost increases, particularly energy. This will impact all charities.
- Demand – driven by poverty. Our survey results (below) show this is a major issue that will impact almost all charities, but most on those in the poverty front line, such as food & debt charities.
- Staffing – increasingly challenging recruitment and retention, including possible redundancies in 2023 as charities increasingly struggle to cut their costs. Many charity staff are low paid and the wage disparity between the sector and public/commercial sector may well increase, impacting both recruitment and retention. Some 90% of charities are volunteer run, so this would be felt most acutely by the medium to larger charities.
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