The UK’s struggling economy is proving to be bad news for charities. According to a recent poll many could disappear as early as next year unless the situation improves.
The poll commissioned by the Charities Aid Foundation (CAF) confirms that as many as one in six charities believe they could close in the next 12 months, while almost half say they are being forced to dip into funds. One in three say they fear being forced to cut services.
The figures will make depressing reading in Downing Street, which believes the sector has a crucial part to play in delivering the prime minister’s vision for his “big society”. The funding crisis comes as charities announce that there is more demand for their services.
Jon Low, CAF’s chief executive, said: “Times are tough and people have less money to donate to charities. This, combined with significant public spending cuts and increased demand for charity services, is having a shocking effect on many charities, calling into question their very viability.
“Many organisations are having to dip into their reserves, cut vital frontline services and some are even concerned about whether they can survive in these toughest of times.”
According to an earlier review by CAF and the National Council for Voluntary Organisations, charitable contributions in the UK fell by a fifth last year, from £11bn to £9.3bn during 2011-2012. Consequently, more than eight out of 10 charities believe their sector is facing ruin, with two in five charities fearing closure if the economic crisis does not recover. Nearly 73 per cent believe they are unable to achieve their goals, while one in four have cut staff.
Small organisations are acutely feeling the effects of the sustained recession, according to the poll. Research by CAF reveals that small and medium sized charities are enduring spiralling losses. They reported losses of more than £300m in 2011, compared with a surplus of £325m in 2007.
CAF has launched a campaign along with the National Council for Voluntary Organisations, Back Britain’s Charities, which calls on government, businesses and the public to get behind the nation’s charitable organisations. It wants the government to modernise and encourage payroll giving and gift aid so that contributions go further. It is also calling on businesses to support charities either through practical means or donations.
Low added: “Charities of all sizes play an essential role in our society, providing social care and education as well as helping some of the most vulnerable people in our communities. We all need to act now to support Britain’s charities so they can continue their vital work.”
Chief executive, Adrian Nottingham of the Manchester-based charity Mustard Tree, which runs soup kitchens and supplies food packages to vulnerable and homeless people, said his organisation was between two and three months away from having to close its doors.
He said: “Donations have remained stable but our expenditure is increasing. “Food and fuel and transport costs are rising and grants have fallen. It’s a perfect storm. We’re getting more clients but we can’t increase our revenues.
“We’ve eaten into our reserves and the trustees will have to look at whether there is still enough to pay off debts and staff. Harsh decisions will have to be made in the New Year when we will have to lay off staff. It’s a precarious situation.”
CAF was influential in forcing a government U-turn earlier this year over plans to limit tax relief for wealthy benefactors who made larger donations. It warned that the move would have a disastrous effect on the culture of giving in the UK.
The chancellor, George Osborne, has been looking to encourage the public to give more. He has expressed hopes that it will become custom for people to leave 10 per cent of their wills to charity and has lowered the inheritance tax imposed on the estates of those who do from 40 per cent to 36 per cent to support the move.
The difficulties facing UK charities could also prove to be bad news for commercial property landlords who are currently letting high street shops to charity organizations. In the current climate charities are often the only tenants prepared to take out long term leases and if they are forced into closure it will result in a loss of income and more empty shops in town centres.