Brexit: A disaster, an irrelevance or a huge opportunity for charities?

Liam Kay considers what the impact of the UK leaving the European Union will be on charities and the people they serve

(Photograph: Getty Images)
(Photograph: Getty Images)

The clock is ticking. The UK is due to leave the European Union at the end of March. After a turbulent two-and-a-half years, the country is still in the process of determining its exit agreement, with trade talks still to come.

The past few years have been littered with promises and threats about the impact of Brexit on the country, on communities and on the charity sector, with increasingly little consensus between the leave and remain sides of the debate.

Two years ago, the Charity Finance Group said that a "clean" Brexit could be more beneficial for the sector than remaining in the customs union and it could "unlock financial resources and cut red tape".

More recently, it has warned that there is a "high risk" that charities are going to be saddled with "all the costs of Brexit and none of the potential benefits".

The National Council for Voluntary Organisations has concerns about the consequences of a no-deal Brexit, saying it should be rejected "to avoid further harm to our communities". It says charities will need to be "an engine of social progress" in the years after the UK leaves.

So what will the impact be on charities, and, more importantly, on those communities and beneficiaries they serve? 

Funding

Charities currently receive about £250m annually from the EU, according to research from the Directory of Social Change based on figures from the European Commission. Most of this money is given under direct management from the European Commission, as well as from several EU funds.

The government has guaranteed to underwrite any funding commitments from the EU to charities until the end of 2020. But concerns remain about the future of the UK Shared Prosperity Fund, the mechanism that will replace EU funding from 2021 onwards.

There are few details, no agreement on the amount of money involved and little information about who and what will be funded.

With charities reliant on money from the public, as well as private sector donors and government, economic turbulence is likely to have an impact on their income. 

Catherine Anderson, chief executive of the Jo Cox Foundation, a charity that tries to address divides in British society, is worried about what will happen in the event of a post-Brexit economic downturn.

"Some people are saying that Gross Domestic Product will reduce by as much as 5 per cent," she says. There might be less disposable income, she says, which will affect people’s ability to volunteer.

"What does that mean for a country that has a rich heritage of charity and volunteering?" she asks. "I think that’s really worrying."

No deal

In a no-deal scenario, the threats are even greater. The Bank of England has estimated that leaving the EU without an agreement would result in an 8 per cent fall in GDP, a rise in the unemployment rate from 4.1 per cent to 7.5 per cent and inflation rising to 6.5 per cent. 

Equally concerning is the charity sector’s lack of preparation for such an outcome.

A poll from the CFG in January found that a third of respondents had done no preparation for a no-deal Brexit, and another third had done "little" to prepare.

John Tizard, chair of the voluntary sector support body Navca, says charities should have contingencies in place for a no-deal Brexit, arguing that it could lead to rising poverty, failure of food supplies, a lack of medicines, community divisions and xenophobia "of a kind we haven’t yet seen".

But he warns that even a deal is likely to lead to lower growth, more inequality and less money for charities and public services generally, due to an expected reduction in the government’s tax income. "We could see austerity++ as a consequence," Tizard says.

The chaos of a disorderly exit would be devastating, according to Tizard.

"If there is no deal, the charity and voluntary sector will have to do a huge amount very quickly," Tizard argues. "There will be lots of problems: lack of food and medicines, travel disruption and so on, with communities feeling isolated and marginalised.

"The government has put the Territorial Army on standby. It has not had the same conversations with the charity and voluntary sector for what might be required."

Last month, Sir Stuart Etherington, chief executive of the NCVO, argued in a blog that a no-deal Brexit would be disastrous for communities and "an economy unable to support the work that charities do" would "create major difficulties for our sector".

Local communities

Government statistics from 2018 say that 14.3 million people live in poverty, 4.1 million of whom are children. If Brexit worsens the UK’s economic and social prospects, the impact will be felt in the UK’s poorest communities, Tizard says, and could mean a significant increase in demand on charities.

Nevertheless, charities are well placed to help heal some of the divisions fracturing British society, he says. Many community organisations have recognised and tried to address social divisions, inequality and marginalisation.

But he adds that charities need to be more vocal nationally on the "transformational change that will be necessary to have a new kind of society and a more cohesive community", rather than simply focusing on mitigating the impact of Brexit. 

The situation is made more difficult by public perceptions of charities, according to Anderson. "Politics is held in low regard, but some big charities are as well," she says.

"Many are seen as an extension of a rather sclerotic government. Charities need to modernise just as much as others. I don’t think we can be too self-congratulatory."

For Jane Thomas, coordinator of the Brexit Civil Society Alliance, the risk is that the London bubble leads to voices from other parts of England and from Northern Ireland, Scotland and Wales being lost or not listened to.

She warns that viewing Brexit through an "English prism" threatens to widen, rather than reduce, divisions across British society.

It is also important to recognise that one of the communities hit hardest by Brexit will be EU nationals living in the UK.

Charities should make sure they have advice and support in place for staff and beneficiaries from EU nations.

Gill Taylor, a charity sector consultant, says the best advice for employers is to familiarise themselves with Home Office guidance on the subject and to audit their workforces. They should also ensure their policies and procedures are compliant with right-to-work legislation.

The government

The Brexit Civil Society Alliance was founded in 2017 with support from charitable funders. Its role is to give a voice to charities in policy decisions made during and after the Brexit negotiations. But Thomas is concerned that, despite the enormity of Brexit, politicians have done little to engage with charities. 

She says that many MPs are vocally supportive of local charities in their constituencies, but very few have considered the impact of Brexit on the funding of those charities and on the constituents they support.

The politicians are also doing little to engage actively with the charity sector despite the Brexit deadline looming and the role charities could play post-Brexit.

"We have a body of expertise in all sorts of organisations," Thomas says. "I wonder why you would not want to have them at the table when you’re legislating. We’re trying to be helpful, and we do feel we have a repository of knowledge, both at a community level and in our policy areas. Use it."

Anderson questions how the charity sector can communicate effectively with government when it is "a box of frogs at the moment".

She says: "Not only are the parties splitting up, but the parliamentary committees are losing power. All eyes are on Brexit, so paradoxically the one thing we need to protect ourselves from is the same thing that is consuming everyone."

She adds that the diversity, size and breadth of the charity sector make it extremely difficult for it to speak with one voice on Brexit. 

The opportunities

Some commentators and politicians have extolled the virtues of Brexit, arguing that it brings great benefits for trade in the longer term.

There is the chance that departing the EU would make it easier for some laws to change and for the sector to get more VAT exemptions than are currently allowed.

The estimated £14bn a year saved on the costs associated with European Union membership could also be ploughed back into supporting local services. 

Brexit has already brought some benefits to more deprived communities. At the start of March, the government announced it was creating a £1.6bn fund for "left behind" areas, many of which voted to leave the EU. Almost £1bn will go to deprived areas in the Midlands and the north of England.

It is likely that charities working in these areas will benefit from this funding in some form.

However, few in the sector appear to see many direct benefits from leaving the EU. 

Third Sector asked a number of charities to comment on the opportunities Brexit presented for the sector, but struggled to find a single organisation that would discuss the benefits of leaving the EU in public.

But Anderson says organisations in the sector must look for the opportunities, regardless of how they feel about the decision to leave. "That means being prepared and being ready with initiatives to fill the spaces that will be left, such as funding streams or different ways of doing things bureaucratically," she says.

This also includes "figuring out why on earth people voted the way they did and really trying to fix some of the things that are going badly wrong." 

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