Increase in demand, rising workloads and static income has small charities fearing closure, says the ‘Shifting Sands of the Small Charity Sector’ research report from the FSI

New research released this Small Charity Week by the Foundation of Social Improvement (FSI) focussing on small charity trends over eighteen months shows increases in demand for services, rising workloads and static income have one in ten small charities fearing closure during the next 12 months.

The Small Charity Index requested information on the challenges faced by small charities during each of the seven quarters since June 2013 to February 2014 with between 154 and 277 small charities responding. The resulting research ‘Shifting Sands of the Small Charity Sector’ paints a picture of a sector stretched to the limit but holding on, but for how long?

Since June 2013 there were significant changes to the perceived plan of closure with fear of closure increasing significantly during 2013. This level decreased by March 2014 but by December 2014 it had risen again back to September 2013 levels.

Challenges

Over half of all respondents saw demand for their services increase over the quarter to December 2014. This increase in demand has grown over the past 18 months, which reflects the reality that people are increasingly looking to charities for support in these difficult times as other services are cut.

In December 2014 the single greatest challenge was workload, with funding in second place. However, over the 18 months the level of demand for services rose to second place as one of the top three challenges.

In December 2014 two thirds of respondents reported that in spite of increasing demand, paid staff numbers were unchanged. This has remained consistent since June 2013.

Financial stability

Funding, cash flow management and to a lesser extent investment were named as significant challenges by between a quarter and half of the charity respondents.

Voluntary income appears to have remained stable for most charities. Statutory funding has also been stable, however since June 2013 there has been a small but consistent trend towards less statutory funding.

Since June 2013 there has been a 23% increase in small charities holding reserves. However, respondents also stated that levels of reserves have been depleted with 45% reporting they had seen levels reduced in the three months to December 2014.

Pauline Broomhead, CEO of the FSI said

“The FSI launched the Small Charity Index to provide consistent data as a platform to raise issues specifically impacting charitable organisations with a turnover under £1.5 million. As a group that represent 97% of the sector it is critical that our voice is heard.

Eighteen months has provided an interesting insight into the many different challenges that small charities are currently facing. Unsurprisingly, workload and demand for services are the greatest challenges to small charities above funding issues. However, funding still has a very significant impact on the sustainability of charities with the number fearing closure increasing back to 2013 levels when the country was in recession.

Static income and increasing demand for services points to trouble. In the short term, reserves may be used as a cost management and cash flow tool to tide charities over. But for how long can this continue when the trend for reduced statutory funding is set to continue as the new commissioning environment fully takes hold of the small charity sector?

Free support for small charities is essential to help reduce the barriers they face. We call upon government to ensure that small charities across the UK are fully supported and that the commissioning environment works for small charities as well as large.”

The full research report is available for download.

The FSI deliver free learning and support services to charities across the UK with a turnover under £1.5 million www.thefsi.org.

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