The charity sector will shrink in the short-term, employ less staff and be left vulnerable through an increasing reliance on public donations, according to a report.

The warning comes in the National Council for Voluntary Organisations (NCVO) 2020 almanac.

This found that growth slowed in 2017/18, with income up by 2%, compared to growth rises of between 3-6% between 2012/13 and 2015/16.

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The number of people employed within the sector is set to fall, most notably through a drop in income caused by the Covid-19 pandemic. In 2019, a total of 909,088 people worked for charities, representing around 3% of the total UK workforce.

But “the sudden lockdowns will have been challenging for many organisations”, says the NCVO, which added that more than 160,000 charity staff had been furloughed in the first six weeks of the lockdown.

“However, with upcoming changes to the scheme and things going back to a new normal, job losses will inevitably affect some sectors more than others,” it said.

Government income as a proportion of total charity sector income is 29%, its lowest point, the almanac found. Even though government income, which totalled £15.7bn in 2017/18 remained stable, growth in income from other sources has seen its proportion of total income drop.

Public fundraising is driving overall income growth, up by £1bn to £25.4bn in 2017/18. Earned income from the public, including services fees, charity shop sales and membership subscriptions, grew by 3% over the same year, to £12.6bn.

A sector left vulnerable

This reliance on public fundraising will leave the charity sector vulnerable due to Covid-19, says NCVO chief executive Karl Wilding.

“Worryingly in the context of coronavirus, a notable proportion of this growth has been from earned income from the public – precisely the area that is most vulnerable to the effects of social distancing restrictions,” he said.

“While the pandemic has seen a burst of giving to some causes, it has seriously hampered most organisations’ public fundraising.”

He added: “There is no doubt that the sector will be smaller in the immediate future. The questions are: how much smaller and for how long, and which organisations won’t make it?

“The effects of the pandemic are felt differently by different sorts of organisations with different income profiles. But the urgent challenge is finding paths to recovery

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