Income is up, but so is expenditure

Third Sector's exclusive research on the biggest charity brands shows that their spending is increasing more rapidly than their income

A lot has been said and written about how the UK's largest and best-known charities have grown substantially in recent years.

Indeed, the latest data from the Charity Commission shows that the 168,000 registered charities in England and Wales had a combined income of £75bn in 2017, and more than half of that amount was generated by the less than 1 per cent of charities with annual incomes of more than £10m.

But are the UK’s best-known charity brands growing rapidly or steadily? Third Sector has analysed the accounts of the 157 charities that feature in our annual Charity Brand Index, which identifies the best-known charity brands (see "Methodology").

A review of their financial accounts shows that the sector’s most prominent charities are growing steadily in size and stature at above the rate of inflation, which stands currently at 3 per cent. Income in the most recent accounts for each charity was a combined £11.4bn, compared with £11bn the previous year, which represents an increase of 3.6 per cent. However, expenditure has also increased, from £10.8bn to £11.3bn, an increase of 4.6 per cent.

The total mean average income went from £70.2m to £72.7m, and average expenditure rose from £68.6m to £71.7m. Fundraising remained the biggest source of income among the 157 charities studied. The data shows that fundraising income was £5.1bn, approximately 45 per cent of the charities’ total £11.4bn income.

*Converted from $ using the exchange rate on 30 December 2016

For the purposes of the study, fundraising income was defined as money raised from voluntary donations and legacies. Income from legacies alone was £1.5bn, an average of £9.7m per charity.

The charities spent a combined £1.6bn on fundraising to raise the £5.1bn, our analysis shows. The charities studied spent £9.1bn on charitable activities, roughly 81 per cent of the total expenditure and 79 per cent of total income.
Investment income was a relatively small part of the charities’ overall income, with a total of £168m for the charities in our study and an average of £1.1m per charity.

£3.4bn on staff

The charities in our study spent £3.4bn on staff – 30 per cent of their overall income. Collectively, they employed 171,022 full or part-time staff and spent £35.9m on redundancy payments, which is an average of £233,000 per charity.

The charities featured in the study paid their highest earners a mean average of £125,403 a year. Only 46 named their highest earners, which shows that many charities continue to ignore the recommendation made in 2014 by the National Council for Voluntary Organisations that they should state the name and job title of their highest earners.

There have also been growing calls for charities to state in their annual accounts how much they spend on campaigning.

Fifty-seven of the 157 charities provided a figure on their campaigning spending. However, it should be noted that not all the charities included in the study would be considered campaigning organisations.

Just under half (74) of the charities studied included their pension liabilities in their accounts. However, some charities might be part of multi-employer pension schemes, which would make it difficult to show their individual pension deficits in their accounts.

The overall reserves of those charities included in the study were £3.7bn, or an average of £23.3m per charity. This means that on average the UK’s biggest charities have almost four months of expenditure in reserve.


Methodology

Our study covers each charity’s most recent accounts published on its own website, at Companies House or on the Charity Commission’s register of charities before 1 December 2017. Some charities might have filed more recent accounts. The 157 charities we featured are taken from Third Sector’s Charity Brand Index. The Wellcome Trust was excluded from our study because its size would have distorted the analysis.

Third Sector analysed data on the highest earner at each charity. For those that presented only their highest wage within a band of £10,000 above the required limit of £60,000, we took the middle point of that band when calculating our average wage.

We used the reserves charities could draw on in times of financial crisis for our study, rather than include funds that were restricted or were not liquid.

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