Charity mergers rise 90% as organisations look for safety in numbers
New research of UK data about the third sector suggests that mergers between charities have risen by 90% in the last year. According to the researchers from RSM, this may have been driven by economic turbulence which many charities faced, while funding remains low.
Charities in the UK have endured tough times in recent years. A decade of austerity saw direct grants from the government stifled, and the heightened spending pressures on consumers the country’s economic policy wrought also hit charity donations indirectly. At the same time, the third-sector’s income shrank following the Covid-19 outbreak, and recent studies have highlighted how fraudsters are still targeting charities – even as reporting of incidents improves.
Amid this, a growing number of charities have sought out security, by merging. The number of charities consolidating by merging with others in the field rose from 174 in 2023 to 331 in 2024 – a jump of 90% – and with over 180,000 charities in England and Wales, researchers from RSM believe mergers can offer several benefits to the sector in the years ahead; including reducing the duplication of efforts and resource where multiple charities might have the same objectives.
Nick Sladden, partner and head of charities at RSM UK, commented, “Carrying out a merger or even being aware of merger opportunities should be on every charity trustee’s radar. The economic turbulence faced by charities last year, which is set to intensify in 2025, has encouraged them to become more outward looking about their future. The stark reality of increasing costs has meant charities are looking for economies of scale and merging with larger organisations with greater access to resources. The increase in mergers is also likely to be due to better administration and the general tidying up of charity funds.”
However, RSM’s analysis of the UK Charity Commission’s data might not be so clear cut. The upward trend in mergers may also have been influenced by other activity, such as separate trusts being merged into larger foundations, possibly because investment returns are better from one larger pot than several smaller ones. In addition, it may be evidence of charities going through a conversion process – moving to a new charitable form such as a charitable incorporated organisation (CIO), which has fewer reporting requirements.
While CIOs have been a less well-known structure in the UK compared to more established structures such as charitable trusts and charitable companies limited by guarantee, in recent years have become the most popular structure for new charity registrations.
Offering further insight, Robert Nieri, legal director at Shoosmiths, added, “The cost pressures over the years, particularly more recently, have prompted a lot of organisations to do something they’ve probably needed to do for years; tidy up their governance into new, leaner models. However, when undertaking a merger, it’s not just the technical aspects that need to be considered, as combining two or more different cultures can be challenging, time consuming and a distraction from the day job. Whilst merging can create many efficiencies and opportunities for growth, the decision to undertake one shouldn’t be taken lightly.”
