Running cost crisis is creating real concern for charities

Foodbanks, community groups and vital support services are having to turn people away because they are at full capacity.

Much-higher demand and sustained financial challenges are leading half (50%) of English and Welsh charities to say they cannot help anyone else.

Research from the Charities Aid Foundation (CAF) which sampled more than 650 organisations found that one in seven (15%) say they are having to make the difficult decision to turn people-in-need away.

Scottish organisations are following a similar trend. Last month, research conducted by the Scottish Council for Voluntary Organisations Third Sector Tracker showed that a third of organisations reported having made use of their financial reserves in the three months leading into April 2023, an increase compared to the same period in 2022.

And almost half (44%) of the organisations using their financial reserves believed that this situation was unsustainable.

One children’s support service in England’s south east said: “The overall picture for our charity is uncertainty and anxiety” and a northern charity reported that it is “stuck in a vicious circle that we are trying to break out of.”

As a result, charities are having to take steps to meet the mounting demand. Of those at full capacity, more than half (51%) are making judgements to prioritise people most in need. More than a quarter (28%) have created a waitlist, and 9% have stopped taking any referrals. An autism charity in the south east said that “it now takes two minutes to fill 50 spaces when we open the waiting list to new referrals”.

CAF’s research also found that a quarter (25%) of charities with capacity issues are scaling back what they do to focus on core services and one in seven (16%) are considering charging fees for their services simply to meet the need. Two-fifths (41%) are signposting to other organisations, many of which are facing similar problems.

Furthermore, the issues charities are dealing with are becoming more complex. Nearly half (47%) of charities surveyed say that more people are coming to them in a state of extreme need compared to this time last year, and two-fifths (40%) are helping more people to navigate public services than a year ago.

As part of the research, a poverty relief charity in London said: “It seems relentless. More and more people come to us in even greater need and staff feel helpless to support them all. Those same staff are also struggling themselves.”

The challenges of the cost of living crisis for charities of higher demand, lower income from donations and grants and inflated costs are reinforcing one another, putting many charities in a precarious position. Nearly two-thirds (61%) of charities say they are having to do more with less compared to a year ago.

In order to try to bring more income in, two-fifths 40% are using their reserves to meet operational costs and a similar amount (38%) are asking funders for help with increased costs. Despite overwhelming need for their services, 12% are forced to reduce staff numbers or make redundancies.

Neil Heslop, chief executive of the Charities Aid Foundation, said: “Many charities are stuck in a Catch 22 situation. They face higher demand, while struggling with declining income, and significantly higher costs.

“Despite being the last port of call for the most vulnerable in our society, they are having to make very difficult decisions to introduce waiting lists, charge fees or turn people away who desperately need their help.

“The pandemic and support in the chancellor’s 2023 budget brought stop-gap solutions, without which many more charities would have folded.

“But with charities facing significant uncertainty, we need government to take the lead and introduce a turnaround plan to support a strong charity sector and thriving civil society for the future.”