Total income is up despite the tough financial climate

Third Sector's analysis of the best-known charities has found plenty of good news for British Red Cross and Christian Aid, but harder times for Britain's biggest fundraising charity

Last year, Third Sector’s analysis of the 155 biggest names in charity found the largest fall in income at the British Red Cross: in 2016, the charity’s income declined by £23.4m. This year the charity has turned things around, recording the biggest income rise among our Charity Brand Index charities.

The BRC’s income ballooned by £32.8m in 2017, more than making up for its 2016 results. This turnaround was due in part to the huge public response to its fundraising efforts in the wake of terrorist atrocities in London and Manchester.

The positive financial news has been echoed elsewhere: Christian Aid and Motability were among the five biggest falls in income last year, but among the five biggest rises this time. Motability’s financial performance has been the subject of parliamentary scrutiny, but Christian Aid’s results are a record for the charity and come from increased EU and UN revenue.

But not everyone has had a stellar financial year. Cancer Research UK, which had the second-largest increase in income last year, saw its income fall by £44.9m this time. It says the previous year’s income had been boosted by a one-off property transaction, which accounted for this year’s dramatic fall.

Overall, this year’s study shows the charity sector is managing to cope in a difficult financial climate. The charities on our list had a total income of £11.7bn, up from £11.4bn the previous year. Spending rose at a similar rate, from £11.3bn to £11.5bn, showing a charity sector still living within its means. The mean average income rose from £73.9m to £75.9m.

Of course, estimating the financial health of the entire sector based only on the accounts of 155 charities is fraught with difficulty. But Charity Commission data, based on the accounts of 168,000 registered charities in England and Wales, show the sector had a combined income of £77bn in 2018, up from £75bn in 2017.

The data indicates that fundraised income is becoming less important, though it still accounts for approximately a third of the earnings at the best-known charities studied. Fundraised income fell from £5.1bn to £4.8bn. The accounts used in our analysis cover the period after the creation of the Fundraising Regulator in 2016 and the fundraising scandal prompted by the poppy seller Olive Cooke’s death in 2015.

Spending on fundraising has also fallen. Last year, £1.6bn was spent on fundraising, but this year the charities in our analysis spent only £1.3bn.

Many in the sector have been talking about the increasing importance of trading income, grants and contracts, and our research suggests that is certainly the case for the biggest charity brands. But the fall in fundraised income was not replicated by legacies.

Money donated to charities this way rose from £1.5bn to £1.6bn, accounting for almost a third of all fundraised income. And the amount spent on charitable activities has risen in line with overall income. Last year, £9.1bn was spent on charitable activities, as defined in the charities’ accounts. This year’s study has found expenditure on charitable activities of £9.3bn.

The number of staff working for the 155 charities fell, from 171,022 to 165,240, but the amount they spent on wages went up, from £3.4bn to £3.6bn. Redundancy payouts fell from £36.3m to £27.7m.

Reserves kept pace with the increase in income to reach £3.9bn, up from £3.7bn. The average charity had £25.7m saved for a rainy day, compared with £23.3m the year before. Pensions liabilities fell from a total of £1.6bn to £1.3bn, suggesting the sector is bringing the issue under greater control. Investment income remains a tiny part of overall income: £177m, compared with £168m the year before.

Despite numerous calls over the years for more transparency in charity accounts, the majority of the charities in our research failed to include certain information in their accounts.

Only 57 charities named their highest earners, and only 54 noted the amount spent on campaigning – loosely interpreted by Third Sector as functions dedicated to policy and lobbying work. Pension liabilities were revealed in only 72 of the accounts featured.

Third Sector will publish a series of more detailed articles on the data on thirdsector.co.uk throughout March and April

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