UK charity sector seeks new funding to fill GOV gap

08 June 2015 4 min. read

Charities in the UK continue to fight for increasingly decreasing funding, as Government austerity programmes cut vital support to many charities, while at the same time finding the demand on their charitable services increase as the wider social care net in the UK is unravelled by austerity. A recent Baker Tilly survey finds that 40% of charities that were dependent on Government funding have had to cut services. Across the wider charity segment, the survey found that new funding sources remain the dominant issue for 71% of respondents over the coming 12 months.

In a recent survey, Baker Tilly asked UK charities about their current funding position* and their longer term income expectations. For its report ‘The current and future state of charities 2015’, the consulting firm surveyed more than 120 charities from across various sectors – with 15% in the health and medical sector, 13% in the social services and relief sector, and 11% in the grant making sector. The charities also varied in size and financial power, with 27% posting an annual income of less than £1 million, 38% falling within the £1 million-£5 million bracket, while the remaining 35% have an annual income exceeding £5 million.

Income of charity over last 12 months

Competitive funding
The current funding profile for many charities has not changed greatly in the past 12 months, with 70% of organisations seeing less than a 10% drop in their available funds. Over a fifth of respondents have seen no change in their income over the last year, and of the quarter who have suffered a fall, 70% saw a drop of less than a 10%. Just over half (51%) of charities saw a moderate increase in income. Yet while the overall funding landscape has remained relatively stable, certain kinds of charities – those that are dependent on Government funding – are finding their lifeline squeezed.

Sector based funding changes

With Government funding significantly decreased for 24% of charities, slightly decreased for 26% and the same for 30%, this funding route continues to be embattled. Individual donations are only up very slightly, while corporate donations are completely flat. The only funding section to see significant positive growth is the non-charitable trading. Of the respondents, 58% say this funding stream increased, propelled by a rise of social enterprises and the increasing trend towards more commercial partnerships within the sector.

Biggest funding challenges

Funding landscape
The survey further explores the funding landscape, finding that charities cite sourcing new funding streams as the most challenging funding aspect. The second biggest issue faced by charities is the full cost recovery of service provisions (45%), followed by maintaining voluntary income (41%). In terms of changes in the way funds are found, the survey results show that 59% of charities indicate that competition for funding is on the increase (up from 46% in 2013), while 29% cite that funding comes with a need to demonstrate its social impact and 27% found stricter application criteria for funding. 

Steps undertaken to replace lost government funding

For charities that lost some or all of their Government subsidies, the survey highlights that many (67%) have moved toward reducing their costs to allow available funding to go further. Other ways in which they are looking to keep their services available is to look for grants, as cited by 60% of those surveyed. 37% are also looking to add more donations based funding. The reduction of funding does however come at a social cost, with 40% of charities cutting some of their services.

Biggest challenges in coming 12 months

Coming challenges
The survey finds that finding new funding sources remains the biggest headache for many charities in the near term, with 71% citing this as a challenge for the coming 12 months. Staffing resources are challenging for 42%, while cost reduction programmes are a worry for 28% of charities. Strategic objectives are the least concerning aspect going forward, a concern for merely 4% of those surveyed.

* Consulting firm Connell Consulting also recently researched the funding landscape of the so-called third sector. The firm finds that as securing funding is an increased issue, non-profits need to find capital through investments, partnerships or mergers.