This report explores the key issues facing local charities and community groups in the UK in 2016. It finds a local voluntary sector facing an ever-increasing demand for services, stimulated largely by an escalation in referrals from other charities and the stretched public sector. At the same time, local organisations are finding it more and more difficult to access funding - particularly to cover core operational costs. A knock-on effect of this is that, without the necessary funds to pay salaries and retain employees, more than three quarters of groups are also seeing a reduction in paid staff. This is compounding existing skill gaps - particularly within fundraising and marketing - and leaving the sector ever more reliant on volunteers. The current situation means that, without significant changes, predictions for the future are bleak. Fewer than half of the local organisations we surveyed were confident they would still be operating in five years time.
In order to ease the strain on the sector, we recommend that government, grant makers, voluntary sector organisations and businesses work together to ensure the provision of more accessible unrestricted funding opportunities for local charities.
We also recommend that continued support is given to local charities to build fundraising capacity, thus helping them to diversify their sources of income. Training opportunities must be accessible and ongoing, ideally including face-to-face support. It is also important that organisations are helped to retain staff and volunteers to avoid loss of skills later down the line.
In addition, we recommend that funders take responsibility for reducing inefficiencies in grant application processes in order to save local charities and community groups valuable time which would be better dedicated to service delivery.
The value of this report has already been recognised by a number of key sector bodies:
"This report provides a powerful insight into the world of local charities, which make up a huge proportion of the UK voluntary sector. It echoes the findings of our 2016 Almanac, showing that smaller voluntary organisations continue to be disproportionately affected by the current economic climate. Representing such a vital part of our civil society, it is of the upmost importance that measures are put in place to help support local charities and community groups to be sustainable over the coming years."
- Gillen Knight, Head of Marketing and Membership at NCVO
"It’s no surprise that demand for services from small charities is on the increase, the results from the survey very much reflect what our 5,000 + member charities are reporting. The demand however is not balanced by increase in income or increase in workforce and so small charities are under enormous pressures as they seek to support those who are most vulnerable in our society. There is an absolute will and determination by small charities to continue but realistically there will be a breaking point and with fewer than one in five charities feeling sufficiently resourced to meet the demand it may not be that far away."
- Pauline Broomhead, Founder and Chief Executive of The FSI
"This report is a timely reminder of the challenges that smaller charities face in securing support for the essential work they do for the wellbeing of local communities. It’s no surprise that many smaller charities are struggling in the current funding environment, but with demand for their services ever-increasing it’s crucial that they find new ways to raise money to deliver these services. The IoF is delighted to be working with Localgiving to promote the skills and resources volunteers and staff need to help them start filling these funding gaps."
- Ceri Edwards, Director of Policy and Communications at the Institute of Fundraising
"This survey is an important benchmark of the sector, and reflects the wider picture we are seeing. It is clear that people are relying on small charities more than ever. But they are facing increasing financial pressures, with cuts to grants. To survive, it is crucial that they get support they need. Small charities are brilliant at innovation and having to think creatively with limited resources. For them to be able to collaborate they need the financial security to have the headspace to connect. We need to take action based on these findings."
- John Barrett, Chief Executive of the Small Charities Coalition
Demand for the services of local charities and community groups has continued to grow.
- 73% of respondents reported an increase in demand for their services. Less than 1% reported a decrease.
- 78% of groups predict further increases in demand over the coming year.
- Of those groups predicting an increase in demand just 18% feel that they are sufficiently resourced to meet this demand.
Although most groups are confident about their immediate survival, many fear for their long term prospects.
- 79% of respondents are confident that their organisation can sustain itself over the coming 12 months. However, this drops to just 46% when extended to 5 years.
- 57% of groups see generating income and achieving financial sustainability as their most pressing issue over the upcoming 12 months.
- 60% of respondents knew of one or more local groups that have been forced to close over the last year - up 7% on 2015 - up 7% on 2015 (53%).
- Encouragingly, 33% of respondents anticipate an increase in their organisation’s annual income in the current financial year, up from 27% in 2015.
- However, two thirds (67%) of groups were still predicting stagnation or a downturn in their financial position in the coming year.
- 76% of groups highlight ‘competition for grants and contracts’ as a financial concern, with 65% citing ‘generating income from individuals’ as a challenge.
Local charities and community groups are adapting to the evolving funding environment but the pace of change is slow.
- Grants were the primary source of income for 50% of groups in the previous financial year - with 51% predicting grants to remain their primary income source in the current financial year.
- 79% of groups have received some funding from the general public in the last 12 months. 65% see difficulty in generating donations from the general public as a current financial concern
- Take up of social investment within the local voluntary sector is slow. Just 15% of respondents have considered social investment as a funding source for their organisation; and more than half of respondents were unsure what social investment is.
Collaborative working is increasing in the sector with a widening range of partners.
- The overall proportion of groups who had worked collaboratively had increased from 75% to 82% over the past 12 months.
- Collaborations with other local charities and local authorities remain the most common. However, there is an increased range of collaborations taking place including work with statutory services, educational and religious institutions.
- Key benefits of collaborative working are cited as: skills sharing, funding opportunities, increased referrals, heightened public profile and reputation, efficiency, increased capacity, spreading risk and improved services.
- Frequent challenges include; conflicting interest, prioritise and procedures, distrust of partners and fear of losing “control” and bureaucracy, overly drawn-out negotiations, too much “red tape” and a lack of “transparency”.
Local charities and community groups are heavily reliant on the time given and skills offered by volunteers
- 97% of groups have volunteers
- 54% of Chief Executives and 57% of finance staff are volunteers
- 27% of groups surveyed said that they found recruiting suitably skilled volunteers to be “challenging” or “extremely challenging”,while 29% found difficulty in recruiting skilled trustees.
Reductions in staff numbers pose a serious problem, impacting on the continuity of services and affecting overall skill levels.
- 76% of respondents had seen a reduction of staff over the last 12 months and 77% knew of one or more local groups that had seen a reduction in staff.
- The vast majority of local charities (88%) have five or fewer employees. More than half (55%) have no full time staff members at all.
The sector has major fundraising and marketing skills shortages, with local charities and community groups still heavily reliant on non-specialist staff and volunteers. 77% of charities do not believe that they have the skills to run a successful fundraising campaign, 22% saying they need “significant upskilling”.
Public trust and confidence in local charities and community groups has not been significantly affected by the scandals that hit the charity sector in 2015 . 59% of respondent claimed that there has been “no impact”, while 14% of respondents said they had seen “some” or a “ great amount” of impact
The state of the sector varies significantly across geographic regions. While charities in the Southeast of England are not immune to the national trends of increasing demand and economic uncertainty, their overall condition is relatively good. However, the implications of the current climate for charities and community groups in the West Midlands and Northern Ireland are potentially catastrophic.