Donations predicted to decline until 2011

Charitable giving will fall by 5 per cent next year and by a further 3 per cent in 2010 before recovering in 2011, according to Neil Parker, an economist at the Royal Bank of Scotland.

Parker delivered his downbeat forecast to about 300 chief executives at the Acevo annual conference in London on Friday. "There is not a lot of good news, unfortunately," he said.

The weak pound would erode income for charities that received funding from countries with stronger currencies, he said, and low interest rates, which RBS predicts will fall to 1.5 per cent, "will undermine returns on deposits".

Parker also said the property market would not recover until at least 2010.

He said giving would not return to 2007 levels until 2012. He added that the charity sector "faced significant problems", but the one bright spot was that he thought the slowdown would be "less severe and shorter" than some other analysts had predicted.

Campbell Robb, director general of the Office of the Third Sector, cautioned against making predictions about giving based on economic data. He said giving "confounds economists" and did not always rise and fall in line with economic conditions.

He also said the OTS planned to approach the Pensions Regulator, which supervises the pensions industry, to "ensure the sector was getting the best advice" on pensions matters.

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