Exceptional pressures will alter the face of the voluntary sector, says Recession Watch Panel

Changes to public spending and a struggle for small charities predicted by Third Sector's team of experts

The voluntary sector will look significantly different after the recession because of changing patterns of public spending and commissioning and the rise of social enterprise, according to Third Sector's Recession Watch Panel.

The panel of voluntary sector leaders, which met for the third time last week to discuss the economic downturn, agreed the sector was facing unprecedented pressures.

Paul Breckell, executive director of finance and corporate resources at the RNID, said public spending cuts and the trend to larger contracts in government commissioning could polarise the sector between huge charities and small community groups.

"The worst is yet to come because of the sector's reliance, directly or indirectly, on the public sector," he said. The Government's desire to commission large contracts could require even the largest charities to collaborate or merge to win public sector work, he added.

Two groups of charities were seen as particularly vulnerable to this and to falls in grant funding - those in the £10,000 to £150,000 income bracket taking on staff or premises for the first time; and organisations in the £1m to £20m range trying to turn themselves into national players. Federated charities could also be hit because they were often made up of organisations in these income brackets, said Tim Waldron, chair of YMCA England.

Dame Mary Marsh, director of the Clore Social Leadership Programme, said social enterprise would become more important. "It's the only thing offering the potential for more income, because there are people who are interested in investing their money for social good rather than giving it away," she said.

Foundations and trusts might move away from grant giving to social investment, she said: "Some private foundations are looking for more secure ways of getting a return for the money they put into the sector."

Breckell warned that the Government's planned social investment bank would not make up for the drop in public funding. "It's welcome, but I'm not convinced it will be as important as ensuring we encourage people to keep giving voluntarily," he said.

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