There's an emerging divide between the experience of smaller groups and their larger counterparts.

Small charities are finding recovery from the economic shocks of the past year more challenging than the rest of the sector.

New research show they are struggling with a lack of volunteers on top of stretched funding and high demand.

The fourth VCSE Sector Barometer, a quarterly survey conducted by Pro Bono Economics (PBE) and Nottingham Trent University’s National VCSE Data and Insights Observatory, has identified an emerging divide between the experience of small charities – those with annual income below £100,000 – and their larger counterparts.

Compared with the first Barometer survey in November 2022, the proportion of small charities reporting an improvement in their finances has fallen marginally to 24%, while the proportion of medium and large charities reporting improved finances has grown to 31% and 29% respectively.

Financial challenges for small charities, which make up 80% of the sector overall in the UK, are being compounded by difficulties recruiting volunteers – with six in 10 (59%) small charities surveyed rating volunteer recruitment as their main concern, compared with just 26% of medium charities and 15% of large charities.

Demand for charity services remains high. The survey found more than three-quarters (76%) of large charities reported an increase in demand over the previous three months, while nearly four in five (78%) medium charities and exactly half of small charities reported the same.

For charities of all sizes, the combination of heightened demand, precarious finances and challenges recruiting volunteers and staff over the past year has taken its toll on the workforce.

Nearly a third (30%) of charities said there had been an increase in staff reporting burnout, or exhaustion, in relation to their work over the past year. In addition, just over a quarter (26%) said reports of low wellbeing were on the rise, while a quarter (25%) had seen an increase in sickness absence.

Nevertheless, the latest survey found more than half (53%) of large charities now expect to meet demand, up from just over two-thirds (44%) in November 2022 - despite the consistent rise in demand over the same period.

This is likely because the largest charities, which possess well over half the sector’s financial resources, have increased their capacity to meet the demand challenge by expanding their workforce in recent months.

The Barometer also found many charity sector leaders are taking steps to try to alleviate some of the pressure on their staff. Nearly nine in 10 (86%) charities reported offering flexible working opportunities in the last year, while six in 10 (60%) offered access to mental health support and just over one in four (27%) provided financial wellbeing awareness. But for smaller charities with limited resources, this support is much harder to provide.

Matt Whittaker, CEO of Pro Bono Economics, said: “The UK’s voluntary sector has supported millions in need through the pandemic and the subsequent squeeze on living standards, sitting at the heart of the country’s efforts to navigate the multiple crises of recent years.

“Vital though this stepping up has been, this survey demonstrates the extent to which it has taken its toll on organisations’ finances, their capacity and the wellbeing of their workforce.

“While there is some good news, with a slight pick-up in optimism and some early signs of sectoral recovery, the overall position remains extremely challenging. And the pressure is being especially felt among small charities, with widespread concerns of dwindling volunteer numbers and precarious finances.

“With small charities forming the backbone of the UK’s social sector, it is important that policymakers, funders and firms recognise both the challenges at play and the benefits of stepping in to provide support and partnership for this crucial part of the country’s civil society.”