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UK charities are considering redundancies in the year ahead as rising operational costs outpace funding, a study* from Rathbones, one of the UK’s leading wealth and asset management firms, shows.
The survey of senior executives at charities with a collective £5 billion of equity investments found almost all (99%) say current funding levels do not match costs.
The pressure is already affecting financial resilience: 81% say they are drawing on reserves to maintain services, while 9% are operating at a deficit and a further 9% say margins are tight.
Rathbones’ research found charities are weighing up difficult steps to manage the squeeze. Half (49%) are considering redundancies in the year ahead, while 44% do not plan to replace staff who leave. A similar proportion are considering selling assets such as property to boost income, and more than a third (35%) are considering cutting back or closing services.
Around 40% say they are considering stopping stock market investments to ease the financial pressure, despite the Rathbones study showing charities are benefiting from investment growth.
Investment performance offers a more positive counterpoint. More than four out of five (84%) charities have seen the value of their stock market investments grow in the past year, including 42% reporting growth of more than 10%. Almost all (98%) surveyed say their investment portfolio delivers enough income.
However, weaker income remains a significant challenge. Three out of four (75%) respondents say total income received by their charity has dropped in the last 12 months, with 37% reporting a fall of more than a fifth over the period.
There are some grounds for optimism: around three out of four charities whose income has fallen in the past two years believe it will recover to previous levels within 12 months. However, 6% say recovery will take longer.
The fall in income has already had a major impact. Nearly half (47%) of charity executives questioned said their organisation has reduced headcount voluntarily in the past two years, while 45% said they had been forced into redundancies. Nearly two out of five (39%) have cut services and half (48%) have sold assets such as property to help generate income.
David Cox, Director of Charities at Rathbones, said: “Charities are under acute pressure as rising costs and weaker income force difficult decisions about staffing, services and the use of reserves. The fact that so many organisations are considering redundancies or selling assets underlines the scale of the challenge facing the sector.
“While there are signs of optimism that income may recover, this research shows how important it is for charities to have a long-term financial strategy. For those with investible assets, well-managed portfolios can play an important role in supporting resilience, helping charities generate income and continue delivering for the communities they serve.”
The research highlights the difficult balance charities face between protecting services today and maintaining the financial resilience needed for the future.
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