Kate Rogers: Bigger doesn't have to be better, say the stats

The data suggests there is still lots of life in small and medium-sized charities, writes our columnist

Kate Rogers
Kate Rogers

Listening to Nick Ockenden, head of research at the National Council for Voluntary Organisations, highlight key trends from this year's NCVO almanac at its launch, I was struck by some statistics. The first showed the economic value of the voluntary sector to the UK, quantified as more than £12bn and comparable to the gross domestic product of a small country such as Iceland. The second highlighted the sector as an important UK employer, with almost three times the number of staff (more than 800,000) than the largest UK corporate employer, Tesco. Both are interesting and important statistics that demonstrate the often overlooked contribution of the voluntary sector to the wider economy, in addition to its crucial social contribution.

But what I want to examine is what the data suggests about how charities of different sizes are faring. Income growth, particularly from government, is noticeably skewed towards the larger charities, perhaps because of their ability to deliver contracts, the main source of government income for the sector. Half of the third sector's £105bn of assets are controlled by the top 100 charities. There are almost 163,000 voluntary organisations in the UK, so that translates to the top 0.06 per cent. It seems, on the surface at least, that the wealthy charities are faring better.

An astute member of the audience drew parallels with the distribution of private wealth in the economy. And she was right; according to the Equality Trust, the top 10 per cent of UK households now own 45 per cent of the country's wealth.

It is also interesting to compare with the corporate world, because the UK market is similarly skewed towards the very large companies. The top five companies listed on the UK equity market represent more than 20 per cent of its total value. The top 100 companies represent 80 per cent.

So less than 0.1 per cent of UK charities own 50 per cent of the sector assets, 10 per cent of UK households own 45 per cent of the country's wealth and 15 per cent of UK listed companies represent 80 per cent of the UK equity market. Should we conclude that bigger really is better?

In investment, historical performance statistics show that smaller companies have delivered superior returns. Over the past 10 years the largest companies represented by the FTSE 100 have returned just shy of 50 per cent; medium-sized companies (FTSE 250) have returned 125 per cent. These smaller companies are more volatile and the dispersion is wider - there are some significant winners and some definite losers in the pack. But overall there was growth in smaller companies that exceeded their larger counterparts.

How does this translate across to the charity sector? It is difficult to draw parallels or a firm conclusion, but maybe we can point to some small but fast-growing areas of the voluntary sector. The evidence shows that social enterprise start-ups are more common, with historical analysis showing startling growth in their number and income, often outperforming traditional, smaller companies.

So although the data points to successful large charities and corporates, there are also signs of life in smaller companies and social enterprises, although their paths to success might be a little more challenging.

Kate Rogers is head of policy at Cazenove Charities

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