Company collapses hit charity income and volunteer support

Bankruptcies and mergers of UK firms are expected to cost the voluntary sector millions of pounds in corporate sponsorship and thousands of volunteering hours.

The closure of Lehman Brothers and travel firm XL in the past fortnight alone is likely to hit voluntary organisations hard.

Sparks, a medical research charity for children, received about £200,000 a year from its charity partnership with XL, more than 5 per cent of its £3.8m annual income.

"It's going to put a substantial hole in our finances," said Paul Connew, communications director at Sparks. "XL gave us very good support. It donated money, encouraged staff to help us and advertised us on its flights."

Jean Gross, director of education charity the Every Child a Chance Trust, which worked closely with London's Lehman Brothers Foundation Europe, said her charity would get all the money pledged before the company's collapse, but the loss of 8,000 bank-funded volunteers would hit charities heavily.

The foundation, which distributed £1m in 2005 according to its latest accounts filed with the Charity Commission, is a separate company with its own resources.

"We've been told it will meet all its current commitments," said Gross. "But it will be a huge loss. Lehman was very supportive of volunteering work. Thousands of employees gave their time to projects nearby."

David Emerson, chief executive of the Association of Charitable Foundations, predicted tighter economic conditions would mean a downturn in corporate giving, but the full impact would filter through slowly.

"Companies are looking at every penny going out of the door, and one thing they can do is cut back on their foundations," he said. "The concern is that fundraisers haven't really seen how serious this is."

He said the effects would be delayed because companies had provided high levels of funding in advance.

It remains unclear how the Lloyds TSB and HBOS foundations will be affected by their parents' merger.

The HBOS Foundation, which was founded in 2002 after the merger of Halifax and Bank of Scotland, got £8m from the bank this year.

The Lloyds TSB Foundation receives 1 per cent of Lloyds TSB Group's pre-tax profits, which in the past three years has averaged £37m.

A statement by the foundation said: "The full details of the group's recent acquisition will be confirmed in the coming months. We look forward to continuing to support charities' essential work helping disadvantaged people to play a fuller role in communities."

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