Analysis: How charities must evolve in an ‘inevitably shrinking sector’

As the long-term impacts of the coronavirus pandemic set in, experts offer their predictions of how the sector will look in a year’s time. Andy Ricketts reports

Profits from this facemask vending machine go to the charity Lenderhand, which supports the NHS. SOPA/Getty
Profits from this facemask vending machine go to the charity Lenderhand, which supports the NHS. SOPA/Getty

The coronavirus pandemic is bringing change to the UK voluntary sector in a never-before-seen fashion, with research from the National Council for Voluntary Organisations, the Institute of Fundraising and the Charity Finance Group warning UK charities are facing a shortfall of more than £12bn this year because of the outbreak.

The pandemic has accelerated some restructures and forced changes in other areas – charities including the RSPCA, Breast Cancer Now and Oxfam GB are among those anticipating job losses.

In its latest annual almanac of statistics about the UK voluntary sector, published in July, the NCVO warned that it expects the sector to “inevitably shrink” as the anticipated recession hits and people are made redundant.

With this in mind, what might the UK voluntary sector look like in a year’s time?

Rhodri Davies, head of policy at the Charities Aid Foundation, says that like many other aspects of daily life, charities “will look and operate differently”. It seems highly likely charities will close as a result of the pandemic, he adds, and large reductions in voluntary sector employees appear to be inevitable as a rapid bounceback appears unlikely.

“It is very likely that we’ll see more collaboration between charities, including mergers, as charities pool resources and some face closure,” he says.

“But we could also see an increase in accessibility as more events are delivered digitally, which could empower and benefit charities that are based in more remote areas and smaller organisations that do not have the resource to travel and attend workshops.”

Remote working and a workforce that has proved itself to be agile in the face of crisis have been positive aspects of the crisis for the sector, he says, adding that some organisations might be able to find savings by closing or scaling back on office space.

The pandemic has also enabled charities to speak to donors about the need for unrestricted funding.

“Charities have had to buy laptops, technical upgrades and mobile technology in order to deliver their services through the crisis and have demonstrated a clear need to have the funds available to respond quickly,” he says.

Angela Kail, director of consulting at the charity think tank NPC, also says she is not expecting to see a rapid recovery from the pandemic, and the sector will have to get used to having less income.

“The way we see it, a lot of money from fundraising won’t come back,” she says, noting that some people have already been cancelling their regular charity donations.

“When you see all the jobs that are being lost you’ve got to think that we’re going to see a lot of people cancelling their direct debits, and that money won’t come back.”

Kail says the fall in the financial markets caused by the outbreak is also a concern, in terms of the amount of income they generate for the major grant-giving trusts and foundations: “A lot of trusts and foundations have been overspending this year to shore up the sector – what does that mean for next year? Particularly as markets are down on where they were in January, there’s going to be less money there.”

She worries that in the months to come it will be very easy for funders to say the unrestricted funding they have supplied “was a one-off – and in the future it’s back to milestones and deliverables and having to submit convoluted paperwork to get hold of cash”.

With local authorities also badly hit, she warns those sources of income for the sector “might be a lot more difficult to navigate. The ramifications for contracts and grants will be longer-term and we’ll still be seeing the effects three years down the line.”

Sarah Vibert, director of public policy and volunteering at the NCVO, believes the voluntary sector will be smaller in a year’s time. Lessons from the 2008 financial crash and the downturn that followed indicates that when redundancies are made and household budgets feel the squeeze, people change their giving patterns, she explains.

“I think charities themselves will shrink in size as a result of redundancies, there will probably be reductions in services and there will likely be the closure of some charities,” she says.

“But overall I would temper that with the fact that it is a very varied sector in terms of income and operating models so we will see lots of different experiences.”

Vibert says it is too early to predict if there will be significantly fewer charities a year down the line because of uncertainty in areas including how the economic bounceback from the pandemic will look.

“Different funding models are really crucial here because lots of charities work really hard to diversify their income but some of those have now really struggled through the pandemic because trading and fundraising has stopped,” says Vibert.

“Conversely, charities that were relying exclusively on one or two government contracts or grants from foundations will have potentially fared much better because we know those income streams haven’t been impacted quite so much over the past quarter.”

Vibert also expects that lockdown will change the way many charities provide their services: “I can’t see charities switching back to exclusively providing face-to-face support now they’ve invested in the infrastructure and technology to do that online.”

Kail says she hopes the pandemic will result in some positive outcomes for the sector – and that when it comes to tricky areas such as mergers, charities look at their options sooner rather than later: “What we know from past experience is that charities tend to not look at those options until it’s too late so they’re not in a strong position.

They tend to wait until they are basically bankrupt and a stronger organisation doesn’t want to take them on. I hope there are mergers – a lot of them would be a sign that the sector is really looking ahead.”

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