The spending cuts mean charities must become more innovative in their approach to funding, according to Martin Brookes, chief executive of the think tank New Philanthropy Capital.
Speaking at the annual conference of the National Council for Voluntary Youth Services yesterday, Brookes told delegates that the big society agenda offered opportunities to charities.
"Charities should see this time of flux as a chance to look critically at their processes and to identify what works and what doesn’t, so they can improve and become more efficient," he said.
Brookes said charities might need to consider potential mergers or partnerships, both with other charities and with private companies. They should also be exploring more innovative funding models.
"The spectrum of financing options is broadening," he said. "There is a growing range of non-grant finance available to charities."
Brookes gave the examples of a model developed by disability charity Scope, which used a mixture of loans and grants from individuals to finance the redevelopment of some of its facilities, and social impact bonds, a new type of bond involving a contract between government and non-government investors, based on the likely outcomes of a scheme.
Brookes said that what particularly excited NPC about the bond was that it focused on the outcomes charities could achieve.
"It means that if you as a charity want to take advantage of the development and potential of social impact bonds, you will need to get serious about measuring your outcomes," he said.