Charity sector concerns laid bare in new report

02 November 2023

Spiralling costs caused by inflation is one of the biggest risks facing the charity sector, according to a new report from Ecclesiastical Insurance.

The specialist insurer has published its third Charity Risk Barometer, an in-depth study exploring the immediate and emerging risks facing the charity sector – with the cost-of-living crisis proving to be an unavoidable factor.

Counting the cost

Over 250 charities were surveyed1 with over four in five (85%) saying they were concerned about increased running costs, while loss of funding was the greatest concern for seven in ten (71%) charities. Almost a third (30%) said they had become more concerned about a loss of funding in the last 12 months.

Of the charities that had raised concerns over loss of funding, almost half (49%) said they were concerned about losing funding from grants and two in five (43%) worried they’d see a drop in direct donations.

Earlier this year, Ecclesiastical’s owner, Benefact Group, published its Value of Giving report which identified a £5billion drop in donations in from 2021 to 2022.

A quarter (25%) raised concerns about the loss of funding from public sector contracts. With many local authorities commissioning charities to deliver services, but struggling with their own financial challenges, there is a risk that charities could lose vital funding – and even be forced to close.

Recruitment crisis

Against this backdrop almost three-quarters of charities (72%) were concerned about attracting and retaining talent in the sector. Earlier this year Pro Bono Economics and Nottingham Trent University published findings revealing more than two thirds (70%) of charities found it difficult to recruit and retain staff last year, with poor pay in the sector contributing to the challenge.

At the same time, unfortunately over a quarter (26%) of charities have been forced into making redundancies as financial pressures grow.

On top of this, as charities try to do more with less and the impact of the cost-of-living crisis looming, over two-thirds (68%) cited concerns over employee burnout due to the pressures of working in the charity sector. Almost three quarters (70%) of charity leaders have become more concerned about employee burnout in the last 12 months.

Over half (55%) said they were concerned about managing the health and safety of staff, volunteers and service users. Despite this, over a third (36%) say they don’t provide any wellbeing support to volunteers. Those that do provide support tend to offer wellbeing policies (34%), mental health first aiders (26%), helplines (26%) and access to a mental health professional (15%), among other benefits.

Hope for the future

Despite the bleak picture, there are some positives to report. Ecclesiastical’s Charity Risk Barometer in 2020 showed the sector did a lot of work during the pandemic to create leaner, fitter and more adaptable operations. From this foundation charities are showing adaptability and creativity in navigating the challenges facing them.

In response to the financial pressures many charities (37%) have cut costs in a range of creative ways. Over a third (34%) have renegotiated contracts with suppliers, a third (33%) have changed activities or services without reducing them and a fifth (20%) have changed energy suppliers.

Most of all, charities are continuing to meet the needs of their users. Even as pressure grows, they continue to develop and deliver services that make a positive difference to the lives of the people and causes that need them most.

Faith Kitchen, Customer Segment Director at Ecclesiastical Insurance, said: “The charity sector has worked relentlessly to adapt and overcome challenges thrown in its way over the last decade. Austerity was followed by the pandemic and now charities are under pressure to meet a spiralling increase in demand as the cost-of-living crisis bites – all while feeling the pinch of a challenging financial landscape.

“What this research has shown us is that once again the sector is showing resilience in the face of all these challenges. Many have a realistic view of the difficulties they face and can be agile in the measures they take to mitigate risk. They face real threats, but from a solid position.

“We want to support charities through these challenges. As a leading insurer of charities in the UK our ambition is to be a strategic partner to the charity sector. Our research and the resources we have available can not only help customers identify and manage their risks but also deliver solutions for the longer term. Our message to charities is that we are here to help them navigate this new normal, they don’t have to face these challenges alone.”

Read the full findings of the Charity Risk Barometer.

1 YouGov Plc survey of 251 Charity decision makers carried out on behalf of Ecclesiastical Insurance. Fieldwork was undertaken between 11 - 21 July 2023.  The survey was carried out online.