Crippling cost of pandemic revealed in new study

Charities suffered a huge financial toll due to the pandemic with a quarter losing 40% of their income, research has revealed.

The Third Sector Research Centre at the University of Birmingham and Alasdair Rutherford of the University of Stirling undertook the study based on data from 50,000 charities that filed returns for financial years ending after March 2020.

Small organisations have been the hardest hit, according to the research.

The study shows that in a typical year in the decade before the pandemic struck, about 15% of charities had spending of at least 25% more than their income.

For organisations with annual incomes of £10,000, this has typically been between 20% and 25% since 2010, but the figure jumped to more than 30%  last year.

The paper also says the change in the level of charities’ incomes in financial years ending in 2020 are “highly distinctive” in comparison with the change in other years.

“In 2020 the median charity experienced a nominal decline in their income of 13%; after adjusting for inflation, the median charity experienced a 15% income decline,” the report says.

It says the effects are much worse than those of the global recession of 2008.

“Notably this is a much more sizeable annual decline in income than those annual declines associated with the Great Recession and subsequent period of public spending austerity.

“Indeed, while from 2009 to 2014 inclusive the median charity experienced a real term annual decline in income, the median relative growth rates for each year over this period reveal comparatively much smaller real term annual declines of between 1% and 4%.”

The paper is part of an ongoing project that aims to measure the effects of the Covid-19 pandemic on the voluntary sector.