What is the state of the sector's finances?
- In 2020/21, the sector’s total income reached £56.9bn, 6% lower than the previous year when inflation is taken into account. The public continued to be the largest income source, making up £26.4bn or 47% of the voluntary sector’s total income.
- Total spending stands at £53.8bn. The vast majority of the sector’s spending (£36.9bn) goes towards charitable activities (69%), followed by £9.6bn in grants (18%) and £6.5bn in activities for raising funds (12%).
- The sector’s total spending in 2020/21 was equivalent to 95% of its total income. This is a lower proportion than 97% in 2019/20. This decreased spending could perhaps be explained by the effects of the covid-19 pandemic when many charities had to close down operations and/or resorted to online activities over in-person activities. However, the difference between income and spending in any individual year does not necessarily imply a surplus, as some elements of income and spending are recorded in one year but 'used' over a period of several years.
The sector’s total income was £56.9bn and compared to £53.8bn in spending
- Compared to the previous year, income dipped by 6% or £3.6bn and similarly, spending decreased by 8% or £4.9bn.
- After initial fast growth in the early 2000s, income and spending plateaued from about 2007/08 and started growing again in 2012/13. However, the rate of increase slowed over time, with a reversal of this pattern in 2020/21, when both spending and income declined.
Income and spending have grown since 2000/01 but the rate of growth slowed in recent years, with a dip in both income and spending during 2020/21, the year of the pandemic
Income by size
- After adjusting spend in previous years for inflation (2020/21), combined income fell for charities of all sizes. There was a faster rate of decline for micro, small and medium-sized organisations (organisations with income under £1m) at 11% than for large, major and super-major organisations (income over £1m) at 6%.
- A majority (83%) of the sector’s income is generated by large, major and super-major voluntary organisations (income over £1m). From 2007/08 to 2020/21, their income has grown by 20% from £39.2bn to £47.3bn, although recent declines mean it is now back at 2017/18 levels.
- Micro and small organisations make up 3.6% of the sector’s total income. Their income fell from £3.1bn in 2007/08 to £2bn in 2020/21 (a rate of decline of 35%). For medium organisations, their total income fell from £9.5bn to £7.5bn (a 20% decline) during the same period.
- The total growth in the income of super-major organisations can be explained by their increased number but also by the strategies and decisions of the organisations themselves. For example, they include organisations that received large one-off donations.
Even though the number of all but micro organisations has declined in 2020/21, over the longer term, larger organisations have received an increasing amount and share of the sector’s total income, while in 2020/21 income of smaller organisations is shrinking at a much faster rate
Spending by size
- Major and super-major organisations (income over £10m) are responsible for over half (55% or £29.5bn) of the sector’s annual expenditure.
- Large organisations – those with an annual income of between £1m and £10m – make up £14.8bn or 28% of the sector’s spending.
- Micro, small, and medium-sized organisations (income under £1m) jointly make up the remaining 18% (£9.5bn).
- On average, organisations of all sizes mostly spent on the direct delivery of charitable activities – ranging from:
- 93% for micro
- 69% for small organisations
- 76% for medium ones
- and around two in three large, major and super-major organisations.
- Micro organisations spent the majority of their income on charitable activities in 2020/21. Small organisations spent a higher proportion on governance than other organisations. Major and super-major organisations spent a higher share on activities for raising funds compared with smaller organisations.
Major and super-major organisations are responsible for over half the sector’s expenditure, similar to their share of income
Proportion of organisations with zero income and spending
- About 15,000 organisations reported having zero income in 2020/21, all of which were micro organisations (income below £10,000). This accounts for 9% of the whole voluntary sector.
- Similarly, approximately 16,000 organisations reported having zero expenditure, almost all of which were micro organisations (income below £10,000). This accounted for 10% of all voluntary organisations.
- About 24,000 organisations or 15% of all voluntary organisations reported having zero assets.
Almost one in ten voluntary organisations reported zero income
More data and research
- Pro Bono Economics blog on the impact of the cost of living crisis on voluntary sector organisations.
Links and resources
- The Directory for Social Change (DSC)’s Funds Online – a database of funding opportunities. Smaller organisations with an annual income below £1m can also use My Funding Central.
- Briefing to understand the process, opportunities and challenges of benchmarking for charities from charity accounting firm Crowe.