Charities are 'yet to feel the worst effects of recession'

Fundraising agency goes out of business as experts predict more pain from public spending cuts

Face-to-face fundraising
Face-to-face fundraising

The worst effects of the recession are yet to come for charities, commentators have warned after a turbulent few weeks in the voluntary sector.

Last week, face-to-face fundraising agency Dialogue Direct Fundraising UK collapsed and parliament debated the impact of the recession on the third sector. Major aid agencies are among the latest to make large job cuts, and in September the UK Giving Survey showed individual donations had fallen by 11 per cent in 2008/09.

Senior figures believe the recession is beginning to bite. Charles Nall, chair of the Charity Finance Directors' Group and corporate services director at the Children's Society, told Third Sector the fortunes of charities were a lagging indicator of the state of the economy.

"I sense a nervousness among finance directors that we are getting to the point where charities will feel the reality of the recession," he said.

Nall predicted government spending on charities would be cut by up to 17 per cent over the next five years.

Stephen Bubb, leader of chief executives body Acevo, will tell his organisation's annual conference on Thursday that the third sector is at a "crucial moment in its history".

He will say that "the nice decade of growing public funding and generous government capacity-building is coming to a close, and a new era of public sector cuts and smarter capacity-building beckons."

Joe Saxton, co-founder of sector consultancy nfpSynergy, said that the "real crunch" would come when government spending dried up in three years' time. "Government spending makes up one third of the sector's income but the Government spends just one or two per cent of its total spending on charities," he said. "So what is a drop in the ocean to government could devastate charities."

"The real problem will not be a fall in donations but the withdrawal of government support."

The 11 per cent decline in individual donations last year was much sharper than the 1.04 per cent annual fall in retail sales. But Cathy Pharoah, co- director of the Centre for Charitable Giving and Philanthropy, said the decline in charitable giving over the course of the recession was likely to mirror the fall in GDP.

"We could see a sharp drop, but overall it will follow what's happening in the economy," she said. "I also think that what major donors do is going to be hugely significant, and that might be affected by issues such as the tax regime."

John Low, chief executive of the Charities Aid Foundation, was more optimistic. "I'm not expecting an implosion," he said. "I'm not expecting a catastrophic failure. For that to happen, the atmosphere in the country would have to be very different from the feeling out there at the moment."

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