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Breaching the dam: The state of the charity sector

Whether providing food or advice, mental health services or warm spaces, the charity sector has stepped up to make a meaningful difference to the lives of people bearing the brunt of the cost of living crisis. The sector has done so while still tackling the social and economic consequences of the pandemic, from helping children ‘catch up’ on missed education, to supporting people managing long-term health conditions. And it has done so while also bearing additional burdens from the backlogs in public services, which are creating extra demands for charitable services.

This triple tide of demand means more people are seeking more help from charities and community groups, and the help they need is often more intensive and for longer periods of time.

Such elevated, protracted levels of demand are now overwhelming many charities and community groups. Half (49%) of charities and community groups expect that demand for their services over winter will exceed their ability to meet it, with almost one in five (19%) charities and community groups expecting to fall significantly short in their ability to meet demand.

Larger charities are attempting to staff up to keep up with this demand. However, many charities with vacancies are having difficulties finding the people they need to fill them. In the meantime, charity sector employees are working longer hours to cover the gaps. But doing so is not sustainable after almost three years of running at pace. In total, 36% of charities and community groups struggling to recruit the staff they need are failing to meet demand as a result, and 41% are being forced to cut services. That ultimately means less support for people who need it.

It is also not clear that recruiting to keep up with demand is a sustainable strategy. More staff means a larger cost base to fund, and a substantial proportion of charitable organisations have experienced a deterioration in their financial positions over the past three months, with many more anticipating further deterioration to come. This financial stress is of such a scale that a majority of charities and community groups are now using their reserves in order to meet their operating costs.

Small charities and community groups are the most vulnerable to this impossible pressure cooker of rising demand and deteriorating finances. Indeed, many small organisations may already have breached their capacity to manage. Small charities and community groups are more likely than any other group to be experiencing financial difficulty, and a net balance of more than one in four (27%) have been forced to reduce the number of paid staff in their employ over the past three months – with further reductions anticipated over winter.

Overall, just under a fifth (17%) of charities and community groups have had to reduce the number or level of services they offer as a result of financial pressures – rising to 23% of large charities, which may be focusing in on their core provision. This follows one in five (20%) charities reporting that they have reduced their use of premises as a result of energy costs, and just under one in ten (8%) having reduced their hours of operation.

The situation now being experienced by charities and community groups requires an urgent response from funders, regulators and government. This data makes a strong case that the safety net is not just fraying, but that parts of it have snapped. People are falling through the gaps as services are being pared back. The unsustainable footing that much of the sector is now on means that the gaps in the safety net charities find themselves filling will continue widening.