The financial health of almost one in eight charities has “deteriorated dramatically” since the cost-of-living crisis started, a survey of leaders in the sector has found.
Among those surveyed three in five say they have seen a deterioration in their finances, with one in four saying their organisation’s financial health is “average”.
Fall in income is a key financial challenge, cited by four in five charity leaders surveyed. Two thirds say income has dropped by a fifth or more.
Rising demand is another, mentioned by more than four in five charity leaders, according to the survey by investment firm Rathbones.
It warned that “drastic action” is already taking place to meet these dual threats, with just over half selling assets as property to generate extra income.
Almost a half have cut back on services and just under three in ten have cut staffing numbers.
Further measures are likely over the next 12 months, with 48% saying they are considering selling properties, while more than a third are considering staffing and services cuts.
Two thirds say they will stop investing in the stock market.
“The charity sector has been under immense pressure over the last few years with the cost-of-living crisis hitting organisations hard, leading to a drop in income at a time when the demand for charity services has never been greater,” said Rathbones head of charities Andy Pitt.
“This financial pressure is turning the spotlight on financial strength and it is clear that many charities will need to make tough decisions in the future.
“However, the sector has always been resilient and will adapt as it always has done.
“Those charities with investment reserves are able to evolve their strategies to ensure they can continue to meet their mission, and our priority is working with our charities to deliver long term sustainable returns during this time of uncertainty.”
An increase in employers’ national insurance contributions announced in Labour’s first budget last week has also added to fears of staffing and services cuts among charities.
Sector bodies NCVO and ACEVO have written to Chancellor of the Exchequer Rachel Reeves calling for charities to be exempt from the rise.
They estimate the increase will lead to an annual additional bill for charities of £1.4bn.
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