Charities remain optimistic despite being hit hard by recession

More than four out of five charities and social enterprises have been badly affected by the economic downturn, yet a surprising 100 per cent remain optimistic about the future, according to the findings of a survey conducted by award-winning social enterprise CAN Mezzanine.

The findings are based on a survey (conducted in April 2010, just before the General Election) of around 70 Third Sector organisations - mostly small charities and social enterprises based in CAN Mezzanine's three office "hubs" in London. They represent a microcosm of the sector, ranging from small single-issue charities employing just two people to the largest organisation, PohWER, which employs around 170 people. 

Organisations were asked how the recession had affected their business over the past 18 months:

  • Half reported a reduction in cash flow.
  • One third reported a drop in donations and grants.
  • All organisations reported making cuts in overheads, with half reducing staff costs and half targeting other outgoings.

Typically, small charities reliant on central or local government funding are struggling to win contracts and many voluntary and community organisations are suffering from lack of secured funding. Membership bodies are finding it hard to retain existing members and recruit new ones.

Two thirds of organisations in the survey are planning for further cuts in overheads over the coming year. Whilst the impact of the likely squeeze on public sector funding over is uncertain, one in six anticipate that the worst is yet to come as competition for a likely dwindling number of grants becomes more intense. Nearly all are sceptical about the ability of government to provide more support for the Third Sector.

To meet challenging times ahead most organisations are seeking new sources of income and innovation:

Two thirds are planning to expand their trading activities

  • Half are exploring new markets
  • Some are looking at mergers and other collaborative work.

Organisations who, predictably, report an increase in business, are those providing business and financial services to not-for-profit organisations, such as GK Partners (a business advisory service to the Third Sector) and the Charity Finance Directors Group. Acting CFDG Chief Executive Officer David Membrey said:  "More charities are seeking our help and support and we are expecting a better year ahead. But there may be an indirect impact on us as, undoubtedly, some of our member charities will merge and other will fold, therefore reducing our number of members and income."

"These findings show how robust and inventive the Third Sector is in combating the negative impact of the recession," says CAN Chief Executive Andrew Croft. "Whilst these are undoubtedly challenging times and many organisations are struggling, this may present an opportunity for social enterprises - as suggested from the survey - to diversify and increase trading. There is also considerable support there for charities reliant on state funding to become more entrepreneurial. But for those charities which primary focus on campaigning, advocacy or service delivery, the entrepreneurial route is not necessarily the answer. Good times are ahead for some, although the journey may be painful in the short term. But we are delighted to see all Party support for the Third Sector."

For comments on what respondents say the new Government can do to support the Third Sector and other quotes, see Notes to Editors.

Ends

More information from:
Anne Nicholls, CAN Press Office
Tel: 020 7250 8046. Mobile: 07973 491439.
Email: a.nicholls@can-online.org.uk

or 

Kate Markey, Deputy Chief Executive
Tel: 020 7250 8060.
Email: k.markey@can-online.org.uk 

Notes to Editors

CAN (formerly Community Action Network) is recognised as one of the UK's leading organisations for the development, promotion and support for Third Sector organisations, social entrepreneurs and social enterprises. CAN Mezzanine has three office buildings in London - two in London SE1 (1 London Bridge and 32-36 Loman Street) and one in London N1 (49-51 East Road, off Old Street). CAN Mezzanine London Bridge has 414 desks, CAN Mezzanine Loman St has 281 desks and CAN Old Street has 480 desks. A recent independent social impact finding survey found that in 2005-6, CAN Mezzanine London Bridge was 55% cheaper than the average of the three largest providers of serviced office space in the UK. This equates to £2,400,891 savings for the Third Sector based on average sized organisations being 5-6 people.

  • The survey was conducted during April, prior to the General Election. It was sent to around 110 charities and social enterprises based in CAN Mezzanine's three London office buildings and to a sample of other small charities on CAN's database. 72 responses were received representing a return of nearly 50%. CAN Mezzanine is regarded as an organisation that is a microcosm of the Third Sector, with a wide range of organisations as its customers.

Responses to the question: "After the General Election on 6 May what one thing can the new Government do to help support your organisation over the next five years?

"One thing that the Government can do is remove the VAT burden on charity joint infrastructure collaboration projects." (Charity Finance Directors Group)

"Open up markets to social enterprises, break contracts into manageable sizes for SMEs, understand the value of second tier organisations and offer contracts to those providing support."  (Social Enterprise London)

"A level playing field for the Third Sector in commissioning process and an understanding by the public sector of the burden placed on it by byzantine commissioning processes." (POhWER - an advocacy organisation)

"Simplify the commissioning process. Place a greater value on small voluntary sector organisations by recognising that they bring something to the table such as greater flexibility, and a more grassroots perspective that is of at least equal value to the economies of scale that larger organisations offer. Stop trying to make voluntary sector agencies deliver public services in the same way that public sector organisations do. Recognise that we bring added value that isn't just about being cheaper."  (Against Violence & Abuse - formerly Greater London Domestic Violence Project)

"I think that knee-jerk or crowd-pleasing policies could significantly slow recovery, so probably the most useful thing they [the new Government] could do is take their time, be decisive and communicate their decisions clearly. That and perhaps provide  seed funding to help people through "transition" - although the concern is that  by providing a buffer people won't be confronted with the economic realities of the situation." (Collections Trust)

"Carers provide unpaid support to family or friends whose health or wellbeing could suffer without this help.  If the millions of carers in Britain stopped caring, the country could not afford to pay the true costs of care. We want every carer to be recognised, supported and offered services to help them maintain their own health and wellbeing." (Crossroads Care)

"Stop scaling up projects so that social enterprises are not obliged to close down or merge with other social enterprises." (GK Partners)

"Invest in modernising the Third Sector by encouraging better use of technology." (Charity Technology Trust)

Case studies

The Collections Trust (an organisation that supports museums, libraries and archives) has experienced "negatives" and "positives" as a result of the recession. They said: "We are employing fewer people on full-time permanent contracts and more part-timers on fixed-term and temporary contracts, which has had an impact on morale and productivity. Public funding has become more competitive and we have seen some contracts pulled or reduced with little warning. But museums, libraries and archives are seeing considerably more use as people search for more valuable  (and cheaper) ways to spend their time. More usage means more work for us. We are also actively pursing an international agenda, given that other EU countries are emerging from recession sooner than the UK and there are more active public spending programmes. The current direction of things is driving us to tighten up our operations and pursue new opportunities which we would perhaps not have done before."

Crossroads Care said that many of its member organisations were facing cuts in public sector spending on social care which has a knock-on effect on them.  They said: "These are testing times which will require us to be bolder in finding solutions to ensure that we can continue to provide high quality services to carers for many years to come and increase the numbers of carers we support ".

The Princess Royal Trust for Carers has been seeking new sources of funding, sharing costs with other organisations and looking at building on collaborative working with Crossroads Care.

Magic Bus (a small charity that works with children and young people living in poverty in India) has found it harder to raise funds through traditional routes so are planning to diversify and explore new markets including outside of the UK market.

The Employability Forum (an organisation which promotes the employment of refugees and the integration of migrant workers in the UK)  has observed a reduction in partnership working as organisations focus on keeping themselves afloat. They said: "There are no extra funds for organisations to do anything other than deliver the activities they are contracted to offer, so a lot of development work for future projects is being lost."