Covid-19: Further evidence shows charities' reserves could run out in three months

Further evidence has emerged that charity reserves are in freefall amid the Covid-19 pandemic and are set to run out within months.

A YouGov survey commissioned by Ecclesiastical Insurance found that 12% of charities expect their reserves to run out within three months, while 17% have set a six-month deadline before their reserves are depleted.

A fifth do not expect to have enough reserves left to last the next 12 months and the proportion rises to 28% when asked whether their reserves will last over the next one to three years.

Income losses from the Covid-19 are cited as a major cause of the financial uncertainty among charities. Ecclesiastical’s survey found that 71% of charities cite the pandemic as a key factor in concerns around income. More than half (55%) say loss of funding is a concern.

“The findings from this research make for sobering reading, but they’re no surprise given the extraordinary year we’ve had so far,” said Ecclesiastical director Angus Roy.

“Charities have become used to dealing with challenges, but this year has given us a perfect storm of a loss of funding through fundraising activities, a reduction in giving from corporate partners, as well as the general public, and an increase in need has left many charities at crisis point.”

Ecclesiastical surveyed more than 250 charities between July and August this year. This also found that charities are embracing new ways of working, with 83% moving functions online and 52% have adapted their services around social distancing.

The survey results are among early findings from Ecclesiastical’s 2020 Charity Barometer research, which is being published in December.

Commenting on the findings Charity Finance Group policy manager Richard Sagar said: “This research helpfully highlights what many in the sector will already know, that so many charities are at breaking point, struggling to provide support for the most disadvantaged in our society at a time when that support is never more needed.”

“But it also points to positive signs, that so many charities have adapted the way they work, to better support those most in need. However, even with the flexibility and resilience they have shown, additional financial support will be crucial if we want to ‘build back better’ after this crisis.”

The figures follow research released in the report Assessing the financial reserves of English and Welsh charities by the Universities of Birmingham and Southampton. This look at the state of charity reserves ahead of the pandemic and found that one in ten charities only had a few day’s reserves left before March, when the impact of the pandemic was first felt.