A lack of available funding for small charities is causing significant financial burden, but the situation is taking the toll on small charity leaders’ mental health too.
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The funding crisis is having a ripple effect across the sector. Due to a lack of available funding from many grant-makers, charities of all shapes and sizes are being served an unhealthy cocktail of lack of income with an increase in demand.

But no organisation is suffering quite like that of a small charity – one that already has minimal resources, minimal income, yet no less demand. And perhaps nobody is suffering more than a small charity leader, who is at the helm, leading an uphill battle.

Recent research from investment firm Rathbones found the financial health of almost one in eight charities has “deteriorated dramatically” since the cost-of-living crisis started, with two thirds claiming income has dropped by a fifth or more.

Considering small charities account for the majority of the sector – around 95% according to data from the National Council for Voluntary Organisations (NCVO) – the maths suggests that the majority (if not nearly all) of those affected have an income of under £1 million. In fact, nearly half of the overall sector has under £10,000.

Almost a half of the charities that have reported financial decline said they have been forced to 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.

Funding cuts

The pandemic, followed by a cost-of-living crisis are the primary causes for added strain, dealing charities with a double whammy of economic turmoil. The impact of this strain is still continuing to be felt today, particularly by funders who have been met with a level of demand that is no longer attainable.

As a temporary solution, many funders have closed to new applications, allowing them time to ensure grants are delivered to those who are already part way through the system and to provide breathing space before providing a fresh batch of funding to new charities.

The Peter Harrison Foundation is the latest in a number of funders to pause or close applications for funding amid concerns over high numbers of applicants missing out. Building firm Barratt’s charitable arm closed applications to its £300,000 grant programme after almost half of applicants failed to meet its funding criteria.

Barratt Foundation received 330 applications for funding through the programme. But 147 (45%) did not meet its criteria. The 27 charities it is supporting represent 15% of the eligible applications and 7% of the overall applications.

Meanwhile, London’s biggest independent funder City Bridge Foundation announced last September that it had closed its grants programmes for a year – due to “an unprecedented surge in demand”, as it prepares for a major funding review. The funder said the closure will enable it to process hundreds of outstanding applications as an extra £200 million funding made available five years ago comes to an end.

Will Charitable Trust and Schroder Charity Trust are among other grantmakers to pause applications while they review their strategy.

Taking its toll

The impact of the lack of available funding is far greater than the size of the charities that need the funding most. And unfortunately, the ripple effect is causing significant mental health concerns for small charity leaders who attempt to navigate this environment.

Breaking Point: The Mental Health Crisis in Small Leadership, a new report launched by social enterprise Fair Collective, in partnership with NCVO, found that 85% of small charity leaders feel their role has negatively impacted their mental health with 20% describing it as ‘severe’.

The report found the mental health of small charity leaders has now reached a ‘crisis point’, with experiences of ‘hospitalisation’, ‘panic attacks’ and ‘helplessness’.

Of those whose mental health was affected, over 90% said it had impacted their work and over a quarter said they felt unsupported. Those working in health, education, or with children and young people experienced the worst impact on their mental health, the report said.

“I have experienced a burn-out that led me to be hospitalised in the local psychiatric hospital,” one respondent explains.

“I was feeling overwhelmed and depressed by the level of need and my inability to make ‘enough of a difference’... I even contemplated suicide as the sector has been my entire life for the last 10 years and I didn’t know how I would live without it but couldn’t also comprehend continuing. It took me several months to recover to a point of stability.”

The research concluded a mix of issues were affecting charity leaders, ranging from internal and organisational challenges to systemic and sector-wide problems. Juggling multiple roles and responsibilities with limited training was a particular factor for many small charity leaders, against a backdrop of increased demand and a competitive funding landscape.

“Basically being a one stop shop for all professional services that other larger organisations buy in i.e. HR, fundraising, legal, bookkeeping, writing all policies and standard operating procedures, branding, webmaster, IT support, marketing, stewardship, being the project manager of numerous projects and the list goes on,” another respondent says.

For Emma Cantrell, MBE, CEO of small charity First Days, the overwhelming pressure has led her to some “dark places”, where her mental health has really suffered.

“The combined weight of responsibility to the people we are helping, chronic funding shortages and a team to look after, as well as everything else that comes with leadership, has meant that at times I have been pushed to my limits mentally,” she says.

“It is only now I realise, after connecting with other charity leaders, that actually this experience is, sadly, common. The pressure in my role is still huge and I have to work hard to ensure my mental health is protected in order to carry on in the sector I am passionate about.”

A way forward

Whilst there is no easy solution to tackling the mental health and funding crisis, funders have been urged to empower small charities and to increase the availability of multi-year funding. The Fair Collective Report also urges funders to embrace a common application and funding process to make things simpler for small charities.

“There are many funders and sector organisations who are meaningfully engaging with, and advocating for, small charities, but this research shows there’s more to be done,” says Fair Collective research lead and founder, Vic Hancock Fell.

“Small charities are essential to their communities and to ensure their survival, we need a shared understanding of the unique pressures they, and their leaders face. This must then be combined with a collective commitment to creating fairer processes responsive to their needs and strengths,”

“Nearly 100% of charity closures in the last 10 years were small organisations, which shows the heavy burden on leaders’ shoulders,” she adds.

The report recommends for all those working in small charities to read, share and talk openly about the research so leaders are better equipped and supported to be able to deliver services for their communities.

It also recommends for leaders to embrace self-care, prioritise organisational openness and take advantage of existing help. For boards, it suggests prioritising health beyond financial health, investing in creating trusting and supportive relationships and prioritising delivering support.

If you’re struggling with your mental health, you can access 24/7 support from Samaritans by calling free on 116123, or visiting Samaritans.org.

You can read the full Fair Collective report by visiting: faircollective.co.uk/ breaking-point-report.

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