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It is still too early to determine the full extent of the impact of the coronavirus pandemic on the charity sector’s finances, the National Council for Voluntary Organisations (NCVO) said today, but the voluntary sector will inevitably be smaller in the immediate future at least.
The comments came as NCVO published its annual UK Civil Society Almanac, the authoritative insight into the charity sector’s finances. Because of the time delay in charities’ accounts being compiled, audited and published, the latest data covers the financial year 2017/18.
The voluntary sector experienced modest income growth of 2% in 2017/18, the same level as for the previous year, 2016/17, confirming a trend of the levelling off of faster growth seen in the years prior. Total income went up by £1.2bn between 2016/17 and 2017/18 to £53.5bn, although almost half of this increase was accounted for by two individual legacies that totalled £555m.
The forecasted economic downturn is likely to have a direct impact on income from the public. During lockdown, voluntary incomes were not hit as hard as expected. According to a joint survey by the Institute of Fundraising, NCVO, and Charity Finance Group, voluntary income from the public (ie charitable donations and legacies) dropped by 14% whereas trading income fell by 72%. This may represent a lagged effect as was the case following the previous recession in 2008/09. The OECD predicts that the UK’s unemployment rate will grow to 9%. As the recession hits and redundancies are made, and as household budgets come under strain, people may not be able to support charities in the way they have done in previous years. Whilst the public has been incredibly generous with online donations during the crisis, social distancing requirements will restrict donor engagement resulting in some loss of individual giving.
Government income grew £280m from the previous year to £15.7bn in absolute terms but remained at its lowest point on record as a proportion of the sector’s total income in 2017/18, at 29%. This reflects other income streams outpacing growth in income from government. The increased reliance on other sources of income further suggests that a decrease in income from the public will negatively impact the sector.
Reserve levels completed their recovery to pre-financial crisis levels, hitting £63.5bn, up from £58.4bn in 2016/17, inching over the previous high of £63.2bn in 2007/08. The value of reserves held as shares will have been impacted since by the effects on the markets of the coronavirus pandemic.
Additionally, NCVO notes that it took seven years to recover its net assets to pre-2008 levels following the global financial crisis. The speed of bounce back this time will vary for different subsectors and will largely depend on the overall economic recovery.
Employment hit a record high of 900,000 in 2019, representing almost 3% of all the total UK workforce. However, the predicted loss of income will instigate restructures within charities and see redundancies across the voluntary sector.
Volunteering rates have remained stable over the last few years. In 2018/19, 22% of people regularly volunteered with a group, club or organisation. While the pandemic is unlikely to influence the overall numbers of people volunteering in the UK, we will likely see significant changes in terms of how people volunteer and who volunteers. People aged 65–74 are the age group most likely to volunteer regularly. The higher risk associated with this age group and the virus could see the voluntary sector increase the amount of remote volunteering available to accommodate the needs of their members. Current volunteers may also shift where they volunteer depending on where they view help is most needed during the recovery.
Karl Wilding, chief executive of the National Council for Voluntary Organisations (NCVO), said:
"Charities have a vital part to play in tackling coronavirus, and in helping the country rebuild after the crisis and beyond. The way in which we saw charities and volunteers collectively support their communities during lockdown was a clear example of the immense difference the sector makes to our society.
Despite this, the voluntary sector will inevitably shrink in the immediate future. Public income being the main source of income growth means that social distancing restrictions and a reduction in people’s disposable incomes will have a direct impact on charities’ incomes. Undoubtedly, this will result in job losses, a possible reduction in services and the closure of some charities.
We will continue to make the case to government, charities and volunteers can reboot the economy, reconnect our communities and contribute to positive social and wellbeing outcomes at a time of extreme challenge. Helping those affected by business closure or job losses, supporting good mental health, and supporting individuals and communities in need – all of which will are central to getting the country back on its feet."
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