Cost-of-Living Crisis update: Charity Excellence
Update: December 2022
What We Know
Our predictive model appears to be accurately forecasting the path of the crisis, but it will be deeper than we originally thought. The weakening resilience since late 2021 was primarily due to deterioration in the funding environment but is now increasingly being driven by cost and demand pressures.
In November, sector resilience fell below the level it was at the height of Covid. The Funding, Resilience (viability near-term) and Sustainability (viability long-term) indicators on the Data Store master dashboard are all at amber and the crisis tracking indicators have continued to deteriorate.
- Funding: The (relatively) good news is that the funding position remains extremely serious but stopped worsening in the summer. This may be due to the increasing availability of crisis funds, but we do not have the data to be able to establish a causal link.
- Demand: The ability to meet demand and maintain service standards continues to decline. Based on other reports, this is hitting those in the front line of fighting poverty hardest, such as food banks and advice centres.
- People: Having sufficient people has shown no significant decline. However, as the vast bulk of sector people are volunteers, this is more reflective of volunteering than staffing. Based on other reports, there appear to be significant concerns about recruitment and retention.
- Resilience: The most marked decline has been in near-term sustainability and liquidity positions (ability to pay bills). As predicted, the risk of charity insolvencies is growing.
What We Think Will Happen: The crisis will be both deeper and longer than Covid. This is due primarily to the huge funding gap, made worse by inflation driving costs and eating into the real value of income, the surge in demand and increasing people challenges. The huge pressures on public sector funding pose an additional risk to those (mainly larger) charities reliant on public sector contracts.
Our people are often low paid/unpaid and significant numbers work in challenging roles, which the crisis will make more challenging. However, few have access to organisational or union welfare support. The financial situation is understandably getting most attention but, our only huge asset are our people, and we think this is a major and growing risk. We have no funding, but have been given access to an AI platform by Biomni and will use this to launch Phase 3 of our crisis support over the holidays. This will include a component to try and help them in accessing the support and help that many will need.
We continue to forecast that:
Near Term: The crisis will be at its worst in Quarter 1 of 2023, with significant risk of widespread charity insolvencies.
Longer-Term: We think sector resilience is largely driven by the economic conditions. We can hope for recovery to begin mid-2024, but think any significant improvement is unlikely until 2024.