Cathy Pharoah: I fear the pain for charities is far from over

But it has never been so difficult as now to discern real patterns behind the ups and downs of daily economics, says our columnist

Cathy Pharoah
Cathy Pharoah

It's at times of economic uncertainty that fundraising charities most need hard information on trends - and are least likely to get it. It has never been so difficult as now to discern real patterns behind the 'noise' of daily economic ups and downs. Retail sales figures are a useful indicator for fundraisers who want to second-guess individual giving trends from consumer spending, but keeping on top of the headline monthly or quarterly results is enough to give the hardiest trend-spotters vertigo.

Bad weather, for example, pushed consumer spending down. Then hot weather, a string of bank holidays and the royal wedding pushed it up again. According to the Office for National Statistics, April was an unusual month - but is there ever a 'usual' month, when we know what to expect? The announcement that Britain's economy grew by 0.5 per cent in the first quarter of this year was greeted by a battery of conflicting opinions as to whether this was good, bad or indifferent news. So should we be optimistic as government spending cuts add a new urgency to fundraising income?

In order to get some 'take' on underlying trends through the economic turbulence, the CaritasData Charity Market Monitor 2011, which I am working on and is soon to be published, will cover changes in fundraising and other income over the past five years - from before to after the recession. It will show how volatile charity income has been, particularly from fundraising.

It will also show for the first time how the very biggest charities, usually seen as the most able to ride financial ups and downs, have recently taken a harder hit than the medium-sized ones. This finding actually echoes recent trends in the retail sector. Smaller shops have been doing well, whereas the supermarket giant Tesco revealed a 0.7 per cent fall in sales compared with the same period last year. One reason is that smaller shops were able to make the most of short-term market opportunities, such as royal wedding memorabilia. Larger organisations, by contrast, have longer-term income goals to keep up. Despite their greater resources, the larger charities are under pressure from more ambitious fundraising targets and thus more exposed to shifts in consumer spending.

There are always counter-trends, too, even in recession. Some causes benefit because their work attracts special public interest, regardless of the general economic environment. Current examples are support for the armed forces, the ever-growing hospice movement and global disasters such as the Japan earthquake and tsunami.

Income from fundraising responds fast to the changing temperature of consumer spending. When economic cycles reach their lowest point, up is the only way to go. Improvements in consumer spending are likely to be reflected, at least in the shorter term, in fundraising performance. But given the perception that consumers lack confidence, I suspect that the pain for charities is far from over.

Cathy Pharoah is professor of charity funding at Cass Business School

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