Nigel Shaw: Are smaller charities better together?

The benefits that charities could gain from mergers and why so few regional charities seek out collaboration opportunities are examined by our columnist

Nigel Shaw
Nigel Shaw

The practice of mergers in the third sector is not uncommon. Over the years we have seen many examples in which two high-profile charities operating in the same sector have come together for the greater good of the organisations and those they serve. Age UK, for example, was the result of a 2009 merger between Age Concern England and Help the Aged, which itself had merged with Research into Ageing in 2001.

When organisations of this size are exploring – and often pursuing – the benefits of mergers, it should be a wake-up call for smaller charities, many of which continue to struggle with financial pressure from public funding cuts.

Despite this, few smaller, regional charities seem to be open to mergers. A report published by the Foundation for Social Improvement (FSI) in June shows one in 10 small UK charities describe their chances of closure as "likely" in the next 12 months – but only 2 per cent of small charities are currently considering a merger.

Merging with a similar like-minded charity could help to deliver the increased funding, knowledge, support and services needed not only to survive, but also to thrive. It could deliver economies of scale, bring additional expertise into the organisation and provide financial security, helping to deliver a better overall service to the users and stakeholders that both charities strive to help. On an operational level it could mean better facilities, increased fundraising capacity and reduced overheads.

When funding is tight and workloads are increasing, something has to give. I do appreciate that mergers are not the panacea to all financial issues, but they need to be on the agenda as charities are expected to do more with less in austerity UK.

There will inevitably be a cost involved, but when you consider the long term implications – and the potential cost savings that could be achieved by the new organisation – it might not be as daunting as it first looks.

Part of it could be a lack of commercial acumen from charities that might not have the resources and professional support of their larger counterparts. There might also be a sense of pride and independence – a reluctance to give away everything that the charity has built up. Although understandable, neither of these should really apply if the charity is at risk of closure due to funding difficulties.

Of course, the current situation is far from bleak for the third sector, but smaller charities in particular must be increasingly mindful of their future finances. With this in mind, mergers must be considered in order to improve efficiency and competiveness.

Nigel Shaw is a partner at the accountancy firm Garbutt + Elliott

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