Departure from the European Union, an uncertain economy and overstretched local authorities are among the biggest political changes that will dramatically affect the landscape for small charities in the near future, according to the Lloyds Bank Foundation.
In its report, Facing Forward: How Small and Medium-Sized Charities can Adapt to Survive, the grant-making body warns that there are 10 key challenges on the horizon for small charities and warns them to implement a range of actions to ensure their survival, including diversifying their funding streams.
The report, published yesterday, also calls on government to actively seek the voices of small charities in forming policy, particularly in relation to Brexit.
The Lloyds Bank Foundation said it would respond by making a new £100,000 investment in the Small Charities Coalition to help it represent small charities in policy discussions with government.
The foundation will also offer some charities it already funds a further three years of funding with no new grant application processes.
Among the 10 forthcoming political, social and economic challenges in the report are the effects of Brexit, which could include the loss of EU funding streams and European staff members. But the report also raises separate concerns about political "slowdowns" as the run-up to Brexit consumes all political attention, making other issues harder to campaign on.
The report also says an unpredictable economy, local authority services stretched to "breaking point", bitter social divides exposed by the EU referendum and increasing job instability will all have an impact on small charities.
A greater need for digital and technological skills, falling public trust in charities and the need for charities to make their voices heard to ensure that the government’s vision for a "shared society" involves the voluntary sector are also highlighted as issues.
To deal with these changes, the report says, charities will need to diversify their income streams, although it warns there is no one-size-fits-all approach for doing so.
It also says charities should plan ahead and understand what sustainability looks like for them, proactively collaborate with others rather than waiting to be forced into partnerships out of necessity, improve the digital skills available within the organisation and ensure staff are properly supported.
Paul Streets, chief executive of the Lloyds Bank Foundation, said: "For many small and local charities, issues such as Brexit and the changing political landscape can be difficult to plan for if you’re facing a constant battle to deliver essential public services, with ever -dwindling resources.
"Charities want to be prepared and we hope Facing Forward helps them face up to the hurricane of change heading their way. But the responsibility doesn’t end there."
The report calls on government to actively seek to hear from smaller charities when developing policy and to drive through changes in commissioning practice, both centrally and locally, to give smaller charities an opportunity to compete.
It says that local government and other local commissioners should involve smaller charities in strategic and practical decision-making and that other funders should support core costs and effective delivery.
Larger charities also need to focus on treating smaller charities fairly, focusing on a better sector and society in the long term, not just their own size and market share, the report says. It argues that infrastructure organisations should be careful not to end up competing with smaller charities.
"We’re doing our bit by improving our grant-making and continuing to lobby for change, but government, other funders and larger charities must also set out how they will support small charities through the tough times ahead," said Streets.
"The future of too many essential public services and charities working at the heart of local communities is at risk if we don’t collectively act now."
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