The cost of living crisis and the impact on UK charities
Just when we thought we might be able to breathe a sigh of relief and sift through the debris left by COVID19 pandemic, here we are in national crisis again. Cost of living is hurtling out of control while we look a recession square in the eye. Inflation is soaring while an announcement from the Bank of England tells us that the pound is worth less. Belt tightening is no longer a choice. Worst of all are shocking reports that a third of children in the UK are now living in poverty, revealing the true depth of this national disaster. But what about the cost of living impact on charities? The very organisations we leaned on so heavily through lockdown, are not exempt from the sky rocketing prices. And now demand for services is rising again. Squeezed to the bare bones and with a general public struggling to afford even the basics, how will nonprofits possibly survive?
The research begins in April with CAF (Charities Aid Foundation), who surveyed 547 UK charity leaders to identify key concerns specifically regarding charities cost of living issues.
They also polled members of the public via CAF Bank as well as an online survey by YouGov on behalf of CAF between 25-29th March.
What they’ve found about the cost of living crisis impact on charities isn’t surprising, but it doesn’t make it any less worrying:
58% of charity leaders said that generating income and finding financial stability was one of their three top challenges
86% of charitable organisations are worrying about the effect of cost of living increases will have on those that depend on their services
71% of charity bosses expressed concern over managing increased demand for their services
59% are concerned that people will not continue to or begin to donate to their cause because of the cost of living crisis
Over 80% of non-profits expect to struggle with increased cost of utilities for their own venues, as well as managing wage increases
Two thirds of charity chief execs are fretting about higher prices of stock, supplies and equipment
Overall, 35% believe their organisation will struggle to survive altogether
Regular polling of the public in March showed that 14% of people plan to cut back on charity donations in the coming year
“After two years supporting their communities throughout the pandemic, they are also having to find the funds to pay higher costs. With tightening household budgets impacting donations, there is a perfect storm facing the sector”
- Alison Taylor, CEO of CAF Bank & Charity Services
How bad is the cost of living crisis?
Partly thanks to the Russian Ukraine war, inflation has risen to an 11% increase, far exceeding the Office for Budget Responsibility prediction in October 21 of 4.4%. It’s currently the highest that the UK has seen for over 40 years and has well surpassed the average national wage increase of 3.8%.
Fuel prices have been hit hardest, with average increases of 12.6p per litre since February 2022.
Energy bills for the average household have jumped up by around £700 per year and one food industry boss has predicted food will increase a whopping 15% by the end of the year. Source BBC
Alongside inflation, we’ve seen a rise in income tax, council tax, National Insurance, and increases to the National Insurance threshold. Benefits are failing to match inflation causing a downward spiral and increase of those relying on and living on charity support.
Pay rose by 3.8% between November ‘21 and January 2022, but including inflation actually equates to a 1% decrease when compared to a year earlier.
All this means, that for the large majority, disposable income has gone. For others, even the basics like rent food and heating are now beyond affordable.
This alone exacerbates the impact of cost of living crisis on charities too, because demand has gone up. And of course, they’re not immune to rising charity costs either.
Independent think tank The Resolution Foundation, who focus on improving living standards for those on mid to low incomes, found that without support, a further 1.3 million people will be pushed into poverty in 2023.
And that’s not including the huge hits the third sector has already taken during the pandemic.
Read more about the impact of Covid on global Charities
So with half of the British public expecting their finances to get worse in the coming months, it’s understandably difficult to stay optimistic about the impact it will have on the many charities struggling already.
What’s the cost of living charity impact so far?
It seems the charity leaders are right to worry.
We’ve already seen 1.6million less people give to charity in 2021 than in 2020 which is being dubbed the ‘cost of giving crisis’.
Alongside the concerns about reduced donations, increased prices and staff retention, the value of monies charities do possess has also gone down in value.
Previous calculations on operating costs that produced forecasts won’t line up either thanks to the now decreased value of the pound and the rising costs.
Pro Bono Economics show inflation predictions that a £20 donation in 2021 will be worth just £17.60 by 2024. Likewise, a £100,000 grant equates to £88,100.
And whilst disposable income declines, any location based charities such as community art centres and the National Trust sites have already seen a reduction in attendance. In fact National Trust released a press statement in summer 2020 saying they’d already lost up to £200million over the early part of the pandemic and were considering redundancies as part of an overall spending plan to save money.
Further issue comes in the form of reduced funding for governmental budgets.
The October 2021 budget saw no new investment in the sector despite the additional demand many charities currently face. Analysis from Pro Bono Economics saw a ‘permanent income scar’ as a result of the pandemic in the form of a £6.6bn spending hole.
This essentially means that less funding available for charities who rely upon government support, as well as less for the most vulnerable in society.
So the bottom line? Charities will ultimately be expected to do more with a lot less.
So what have individual charities had to say?
We’ve taken statements from three different charity websites from different areas of the charity sector as a snapshot of the overall perspective and impact of cost of living.
Macmillan Cancer Support
Macmillan are helping to support those already under financial strain and have been able to dedicate an additional £3.5 million to help those with cancer cope with the rise in cost of living.
A dedicated website page about rising costs includes good advice and support which should go some way to navigate through it as well as possible.
Magic Breakfast
In their spring statement, children’s charity Magic Breakfast, who help provide meals for children in poverty, said their average gift amount had nearly halved since September 2021. This is a typical story for those charities supporting cost of living crisis in real terms. Magic Breakfast said:
“The cost of living crisis, though receiving headlines recently, is years in the making. Certainly, geopolitical developments, such as the Russian invasion of Ukraine, or the Covid-19 pandemic, have placed unprecedented pressure on public finances. But real wages have still not surpassed those from 2008.
The Government can and should do more to help the communities we work with weather price shocks and cost of living rises.
Currently only a minority of schools in communities likely to be worst hit by the cost of living crisis are able to offer free breakfast support.
We maintain our hope that the Secretary of State for Education and Minister for Children and Families will work with us, building on some of the good steps recently taken by the Government, and reach more children in these communities.”
Citizens Advice Bureau
Another impact charity Citizens Advice, said the number of those asking for help has never been higher.
Where can I get support with the cost of living crisis?
— CitizensAdvice (@CitizensAdvice) April 1, 2022
Here's what you need to know ⤵️ https://t.co/qh86TWnivY
“Cost-of-living pressures are at boiling point. April’s price hikes haven’t yet hit and already people are turning to our services in record numbers.
Frontline advisers are hearing desperate stories of families living in just one room to keep warm, people turning off their fridges to save money and others relying on hot water bottles instead of heating due to fears about mounting bills.
“Our data has reached red alert levels. If the government doesn’t act soon and bring forward a package of support for those on the lowest incomes, many more households will be pushed beyond breaking point.”
Is there any light at the end of the tunnel?
The Charity Commission regulates charities and aids them by giving tools and understanding to charities to succeed. They benefited from the 2021 budget announcement which saw budgets set to rise to £29.3m by 2024-25.
Good news at least for them, who’d previously seen a fall of £10m to £21m between 2010 and 2017.
This won’t have help in the immediate future, but should help with planning ahead and reconcile surviving charities in the future.
According to the CAF 2022 landscape report 81% of charity leaders still feel optimistic about their own organisations future. Admittedly only half felt as positive about the future of the charity sector overall.
And as we’ve seen in our blog ‘fundraising trends in 2022 for UK charities charities are incredibly resourceful, resilient and nimble to adapt.
Charities cost of living crisis survivors will be those who are calculating every penny and those making extremely careful decisions about where they invest.
What can donors and fundraisers do to help charities?
CAF recommend that donors who are looking to continue supporting charities or make the most of their charitable donation should:
Always include gift aid which increases the value of every pound by 25% for the charity.
See our Gift aid - lowdown blog for a detailed explanation about why gift aid declaration is so important to charitable giving
Talk to your employers about a payroll giving scheme where employees can donate to any registered UK charity straight from their salary pre tax, meaning the charity will receive more and it costs the donor less
Donate clothes, furniture, books and any other household items as you can to support charities. These good can be sold in charity shops or go directly to people in need. Add gift aid here too to make the most of every donation.
Volunteering has never been more important to charities. They have always been an essential part of the third sector, but if people are able offer their time and skills, it’s a solid way to give practical help
Campaigning with a local action group is also an honourable way to support charities and people in need. Anything from leaflet dropping to writing to your MP or raising awareness in your community helps.
Conclusion
Charities and the third sector in general have been a vital lifeline in the national response to Covid19 and will continue to be in the coming months.
Many of the larger charities have healthy reserves and it may be that those reserves can be spent helping to meet the new increased demands, or invest in technologies that could help reduce costs or soften the financial blows in the long run.
Whatever comes next, it’s critical at this stage for charities to stay informed and update their targets to align with realistic expectations.
Well trained, committed professional Fundraisers like we have here at Charity Link make the very most out of every vital opportunity to raise funds for our charity partners.
We continue to devote our business to helping some of the charities with most impact across the UK. We invite anyone that’s passionate to do the same to consider a role in professional fundraising.
To learn more about what it takes to be a fundraiser, why not visit our fundraiser jobs page or get in touch with our recruitment team to see if you’re a good fit?
