What will be the impact of the recession on voluntary
organisations and charities?

Writing exclusively for the House magazine, Tom Levitt MP reports as Chair of the All Party Parliamentary Group on the Community and Voluntary Sector.


In the face of a global downturn we need to take a sober view of the reality of the recession on the voluntary sector. The truth is that the recession is challenging for all, with different charities affected to differing degrees. How will organisations respond to the economic climate? Will they weather the storm and develop the long-term strategies needed to emerge successfully from a recession?

There is little UK long-term data about the impact of recessions on the sector, although media conjecture and anecdotes abound. We know already that today’s recession is a very different ball game from previous ones.

The Charity Commission reports that half of all charities say the downturn has affected them directly, whilst 58% of these say that their finances are becoming more precarious. The extent of the pressure on charities during this time will vary according to their size, role, sub-sector and geography. Some organisations will fail, others will emerge stronger; some sub-sectors will face increased demands, others fewer.

The evidence suggests that legacies and income from investments are suffering most, whilst demand for charities’ services is generally rising. The Charity Commission is reminding charities that today might be the rainy day their savings were earmarked for tackling.

Despite the growing demand for the essential services the voluntary sector increasingly provides, declining income levels are forcing charity leaders to put the brakes on recruitment. Nearly one in five expects to reduce staffing levels during May, according to the NCVO's latest quarterly Charity Forecast survey. This is likely to impact on all frontline services.

All charities and voluntary organisations should consider a range of measures to secure their long term future. Turbulent times mean that they will have to act quickly and decisively to put in place good systems for processing information about financial performance. Early warning of financial difficulties is the secret to survival. Furthermore, to overcome the challenges of the financial climate charities will, more than ever, need to diversify their income streams; collaborating or even merging with others are options that may ensure survival.

Government funding and donations or purchases from the public together account for three quarters of the sector’s income. As philanthropy seems to be relatively resilient, the funding practices and policies of statutory contractors and funders will have a major influence on the financial health of the sector.

It is essential that people continue to give to good causes and (with the exception of some corporate donations) they seem to be doing so, as the record 2009 Red Nose Day demonstrated. Charitable giving is heavily dependent upon a core of just over two million donors. Historical evidence from both sides of the Atlantic suggests that recessions cause the rate of increase in charitable giving to slow down; unpublished evidence from NCVO and CAF suggests that in the last year charitable giving in Britain has actually increased slightly.

So it is too early to conclusively assess the impact this recession will have on the voluntary and community sector. The Government has set out a range of specific proposals to help them address the downturn. The sector needs to make sure that the financial support they have been promised is spent and spent wisely, and that it reaches those most at risk. It is important that the Government and the sector continue to work together, to monitor both the situation and ensure the best use of any additional resources that are available.

In the longer term, the Third Sector must work together with both the public and private to help construct a new vision of social and economic stability. The Third Sector in all its guises can contribute greatly to a more sustainable economy, rooted in greater equality. Socially responsible economic methods will help ensure local communities emerge from the recession stronger than before, something which is in all of our interests.

Studies of the economy, the voluntary sector and schoolroom science all tell us that when there is light at the end of the tunnel, the green shoots will not be far behind.

Tom Levitt MP, May 2009