More bad news for the sector's economic outlook

Vital funding from the UK’s 25 most popular mass participation events is forecast to drop by a £100m this year – plunging many smaller charities into financial freefall.

Last year these events proved to be the lifeblood for both big and small charities alike, raising a collective £143m, the highest figure in five years.

However research suggests this year will see an unprecedented drop in income due to the health crisis resulting in many small charities struggling to deliver services on the back of such a substantial shortfall.

With scant reserves, it is feared smaller charities reliant on public fundraising won’t be able to replace the drop in income while larger charities, although struggling, are able to make economic efficiencies to adjust to the income drop.

The Massive agency said that if large privately-run sporting events which raise millions for charities every year are included such as the London Marathon, the figure could pass £400m in 2020.

Cancer Research has cancelled all 380 Race for Life events this year, which raised nearly £35m last year, Macmillan dropped its coffee mornings which brought in £28m in 2019 and even Movember lost out on a potential £11m.

It comes as separate research shows that reserves held by the UK’s largest charities were already in decline before the coronavirus outbreak hit.

Analysis of the latest accounts of the top 50 charities by annual income conducted by the accountancy and advisory firm BDO found organisations held on average two months of reserves going into the pandemic, down from three months when the firm last carried out its survey in 2017.

This follows on from data published the Institute of Fundraising and the Charity Finance Group which found charities were expecting income to fall by almost a quarter this year, equivalent to a £12bn loss.

Jill Halford, national head of charities at BDO, said: “The impact of Covid-19 has been a wake-up call for charities, and brought into sharp focus the importance of having sufficient free reserves as a protection from income shocks. The fact that reserves were falling prior to the pandemic should be a particular cause for concern, and will no doubt lead many charities to revisit their reserves policies.

“In our review, we found notable areas of non-compliance, which may partly reflect a lack of clarity and specific guidance on how to identify and report free reserves. We would urge the Charity Commission to address this at the earliest opportunity to help charities to protect themselves both during the current crisis and beyond.”