Leonard Cheshire conducting major restructure to save £18m a year

The disability charity Leonard Cheshire is carrying out a major restructure aimed at saving £18m a year.

The charity said it had been spending more than its income “for an extended period” and was “operating within an overdraft facility”. 

The charity employs about 5,000 staff, consisting of almost 3,700 full-time equivalent posts, of which 440 are in back-office, full-time equivalent roles. 

No cuts to frontline staff are expected but all back-office staff have been offered voluntary redundancy, with 140 such departures agreed and a second round of voluntary redundancies being carried out this month. 

The charity hopes to keep any compulsory redundancies to a low level after the conclusion of the voluntary redundancies. 

“As part of our strategic reshaping and resizing we will be significantly scaling back and stopping some of our current UK and international programme work,” a spokesperson for the charity said. 

The disability rights campaigner Doug Paulley published two emails sent by Leonard Cheshire chief executive Ruth Owen to staff in March and April

The first email says the charity must save £18m over the next 12 months to tackle a “financial challenge” that has “been building up over several years”. 

It says: “For an extended period we have been spending more cash than we have been receiving overall, and that’s depleted the cash we have in the bank to such an extent that’s it’s just not sustainable anymore – we are running out of cash and we need to make savings of circa £18m in the next 12 months.”

It also says: “The issue is that we do not have sufficient level of reserves and are operating within an overdraft facility because of reserves being reduced over time due to expenditure exceeding income,” it says. 

“In recent years Leonard Cheshire has undergone significant expansion of programmes, many of which have not been fully funded through full cost recovery, and has also made significant investments in IT and improvement of the estate.

“It’s only recently that the challenging position on cash has been highlighted through improved financial reporting and is being addressed by the executive team and board with a full understanding of what we must do. We have been exploring all options to address the underlying issues and will continue to do so.”

The email says the reasons for the financial issues include the “rapid expansion of activities without the income to fully fund the activities and the connected staffing structures", fees not keeping track with rising costs, “sudden and substantial cuts in sources of UK government funding for our international work” and two years of the coronavirus pandemic hitting the charity’s fundraised income and increasing costs such as those for PPE supplies.

It says the charity’s single biggest cost is its payroll, so it must reduce staff numbers to become more financially sustainable. 

The second email says the charity had identified £9m worth of savings over the previous month. 

It says some areas “will lose a high proportion of people, and new ways of working need to be defined as a result”. 

It says that in addition to the redundancy process, the charity was looking at every area to find where it could make savings. 

This included inefficiencies such as tradesmen travelling from Birmingham to Devon to carry out basic building maintenance. 

It indicates that, although no decision has yet been made, the charity appears likely to surrender the leases on its offices in London and Wolverhampton because “it’s looking increasingly likely that keeping the current office spaces in the longer term isn’t going to be cost effective”. 

Ruth Owen succeeded Neil Heslop as chief executive of Leonard Cheshire in November 2020.

Heslop, who joined the Charities Aid Foundation as chief executive, told Third Sector in 2018 of his plans to increase the number of people Leonard Cheshire supported without significantly increasing the charitys spending. 

A spokesperson for Leonard Cheshire said: “We are reshaping and resizing the organisation, balancing our ambitions for the future with a robust approach to costs, as we grow the organisation’s impact in a way that is financially sustainable.  

“With a new CEO and executive team, work is underway to reshape and revitalise the charity, sustainably growing its impact. Transformation is right at the heart of the new organisational strategy being developed.

“While we are implementing measures to reduce overall costs, as well as increase income, job losses outside of the frontline care and supported living services are sadly going to be inevitable. 

“We will always try to keep these to a minimum and handle any redundancies as sensitively as possible. This will not impact on the delivery nor quality of our frontline residential and supported living services.”

The charity aims to complete the restructure by the end of the calendar year.

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