Annual charity grants from foundations up by 10 per cent

Giving from the top 300 UK foundations has risen, but a drop in foundation income signals that a fall could follow, says Cathy Pharoah of the Cass Business School

Cathy Pharoah
Cathy Pharoah

Grant-making by foundations has risen by 10 per cent in real terms over the past year despite a roughly similar drop in their income, according to a new report published today by the Association of Charitable Foundations.

But Cathy Pharoah, professor of charity funding at Cass Business School, who led the work on the report, warned that a drop in grant-making could follow because of the fall in income.

The report, Foundation Giving Trends, uses figures in the most recently available annual reports of the top 300 UK foundations based on the annual value of the grants they give out.

Because foundations do not all use the same year-end, the most recently available data spans 2011 to 2013.

The report shows that grant-making by the top 300 foundations rose from £2.19bn in 2010/12 to £2.41bn in 2011/13. But income fell from £2.56bn to £2.31bn over the same period, says the report, which is the first in an annual series.

It says that one of the reasons for the drop in income is a slowing down in the number of new gifts made by wealthy donors, largely because of weaker economic growth.

The ACF said the top 300 foundations accounted for 90 per cent of giving by the 10,000 foundations in the UK. 

Foundations represent 14 per cent of total giving from private sources to charitable causes in the UK, the report says.

The Wellcome Trust was by far the largest grant-maker by value, making grants worth £511.1m in the year to September 2012, the report says. The Gatsby Charitable Foundation was second with grants worth £144.5m made in the year to April 2012. Comic Relief was third with £78m given out in the year to July 2012.

Pharoah told Third Sector that it was unprecedented for grant-making to outpace income so significantly and that this indicated that several foundations were taking more of a total-return approach to their giving, rather than spending purely on the basis of income.

She said that attitudes among foundations were "loosening up" as portfolio values started to grow again, enabling them to find ways to put more into society at a time of reduced government spending and increased austerity and unemployment.

But she warned that income was more indicative of future spending patterns than recent expenditure.

The report says that the number of applications for grant funding has fallen in recent years. The Paul Hamlyn Foundation experienced a decline from almost 2,000 applications in the UK in 2008/09 to about 700 in 2012/13.

"This vital research will help us see the patterns of change in order for philanthropists, practitioners and policy-makers to make better decisions based on an understanding of the factors that drive the sector," said Richard Jenkins, a policy adviser at the ACF.

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