Charities forced to merge or lay off staff as economic crisis hits their funding

Services for the most vulnerable are in jeopardy as donations dry up

UK charities are facing a severe funding crisis as public service cuts affect their budgets and donations are predicted to remain at rock-bottom for at least another year.

One in three charities is considering merging with another charity while one in six ponders joining a commercial organisation to ensure its survival, according to a survey by a leading firm of charity auditors.

One in 10 charities has made staff salary cuts and redundancies and almost a third have deferred projects. One in 20 is looking to sell assets such as properties to plug the funding gap, Baker Tilly found in its study of 175 leading charities.

The cuts could have a "devastating knock-on effect for society" as services which are relied on by many vulnerable people are put in jeopardy, the business adviser warned.

This worrying report comes after an extremely difficult year for charities. Many have seen donations plummet during the recession. Corporate giving has dried up and individual donors have reduced their gifts. Now with many experts predicting no significant recovery until the fourth quarter of 2010, many charities which have so far weathered the storm are concerned about how to keep their services going.

The biggest concern for charities is public spending cuts. This will hit charities hard as government funding is now the single biggest income source across the charity sector.

More than a third of respondents had already seen a reduction in government funding, with nearly two-thirds anticipating a further drop in the next 12 months. Meanwhile, 93 per cent of respondents reported a drop in investment income, with 61 per cent recording a significant fall.

More than four in 10 charities have already seen a fall in individual giving with nearly one in 10 reporting a significant drop. Corporate giving has fallen for 39 per cent of respondents with an even larger proportion predicting further reductions over the coming 12 months.

Andrew Hind, chief executive of the Charity Commission, said: "This survey shows that increasing numbers of charities have woken up to the imminent reduction in public spending.

"While charities have no control over this funding environment, it's the steps they take now that can even the odds when meeting the challenges ahead. I'm particularly encouraged that over a third of respondents are considering methods of joint working or merger – a potential solution the Commission has been urging boards to consider since the downturn began."

Karen Spears, head of charities at Baker Tilly Restructuring and Recovery LLP, said: "With 90 per cent of respondents not currently seeing any significant improvement in the economy for their charity, and 45 per cent not expecting any positive change until the last quarter of 2010, charities will need to constantly review the position and take steps to control their finances while ensuring that the charity's objectives are met.

"Some have not used the good advice available to them. Hiding their heads in the sand is not an option. Charities need to regard this as an opportunity to examine their objectives, and revisit core activities and projects."

Case study: 'We suffered the most catastrophic collapse of contributions imaginable'

*For Acorn Children's Hospice Trust, which runs three children's hospices in the West Midlands, 2010 looks as if it will be just as bad a year as 2009. But neither will be as diabolical as 2008, when £1.5m of donations dried up in six weeks.

"Between October and mid-November 2008, we suffered the most catastrophic collapse of voluntary contributions we could have imaged," said David Strudley, chief executive of the charity which supports 500 children with life-limiting or life-threatening conditions, and their families.

"Both individual and corporate donations just vanished. The corporate tap seemed to have been turned off, and also people had stopped giving those ad hoc sums which were so important to us. Our legacy income was also hit as the probate process took longer because houses wouldn't sell.

"It all came together in that six-week period of absolute ghastliness. It was an absolutely dreadful time. Our investments had fallen away and when we went to friends to see if they could help us they were in exactly the same boat themselves. In January we were forced to make redundancies and lose 19 people out of 320. It was the most painful thing we have ever done and the wounds are still healing. Since then, we have had 10 months of concentrating on getting income and expenditure to balance. Next year, we are expecting more of the same. We went straight down an almost vertical drop and over this year we have just bobbed along the bottom. However, we have thrived in a couple of areas – our 43 charity shops have made a profit as more and more people come in – including people who probably wouldn't have shopped in a charity shop before. I think 2010 will mean more of the same.

"Yes, we are still in survival mode but there are some things to be positive about. We are confident we will survive 2010, having managed to survive 2009. I am nowhere near as gloomy as I was this time last year."

Start your day with The Independent, sign up for daily news emails
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Recruitment Genius: Search Marketing Specialist - PPC / SEO

Negotiable: Recruitment Genius: This is an opportunity to join the UK's leadin...

Recruitment Genius: Sales Administrator

Negotiable: Recruitment Genius: This caravan dealership are currently recruiti...

Recruitment Genius: Invoicing Clerk

£14500 - £17500 per annum: Recruitment Genius: This company are contractors to...

Recruitment Genius: Executive Administrator / Marketing Assistant

£20000 - £25000 per annum: Recruitment Genius: This leading supplier of packag...

Day In a Page

Greece debt crisis: What happened to democracy when it’s a case of 'Vote Yes or else'?

'The economic collapse has happened. What is at risk now is democracy...'

If it doesn’t work in Europe, how is it supposed to work in India or the Middle East, asks Robert Fisk
The science of swearing: What lies behind the use of four-letter words?

The science of swearing

What lies behind the use of four-letter words?
The Real Stories of Migrant Britain: Clive fled from Zimbabwe - now it won't have him back

The Real Stories of Migrant Britain

Clive fled from Zimbabwe - now it won’t have him back
Africa on the menu: Three foodie friends want to popularise dishes from the continent

Africa on the menu

Three foodie friends want to popularise dishes from the hot new continent
Donna Karan is stepping down after 30 years - so who will fill the DKNY creator's boots?

Who will fill Donna Karan's boots?

The designer is stepping down as Chief Designer of DKNY after 30 years. Alexander Fury looks back at the career of 'America's Chanel'
10 best statement lightbulbs

10 best statement lightbulbs

Dare to bare with some out-of-the-ordinary illumination
Wimbledon 2015: Heather Watson - 'I had Serena's poster on my wall – now I'm playing her'

Heather Watson: 'I had Serena's poster on my wall – now I'm playing her'

Briton pumped up for dream meeting with world No 1
Wimbledon 2015: Nick Bollettieri - It's time for big John Isner to produce the goods to go with his thumping serve

Nick Bollettieri's Wimbledon Files

It's time for big John Isner to produce the goods to go with his thumping serve
Dustin Brown: Who is the tennis player who knocked Rafael Nadal out of Wimbeldon 2015?

Dustin Brown

Who is the German player that knocked Nadal out of Wimbeldon 2015?
Ashes 2015: Damien Martyn - 'England are fired up again, just like in 2005...'

Damien Martyn: 'England are fired up again, just like in 2005...'

Australian veteran of that Ashes series, believes the hosts' may become unstoppable if they win the first Test
Tour de France 2015: Twins Simon and Adam Yates have a mountain to climb during Tour of duty

Twins have a mountain to climb during Tour of duty

Yates brothers will target the steepest sections in bid to win a stage in France
John Palmer: 'Goldfinger' of British crime was murdered, say police

Murder of the Brink’s-MAT mastermind

'Goldfinger' of British crime's life ended in a blaze of bullets, say police
Forget little green men - aliens will look like humans, says Cambridge University evolution expert

Forget little green men

Leading evolutionary biologist says aliens will look like humans
The Real Stories of Migrant Britain: An Algerian scientist adjusts to life working in a kebab shop

The Real Stories of Migrant Britain

An Algerian scientist struggles to adjust to her new life working in a Scottish kebab shop
Bodyworlds museum: Dr Gunther von Hagens has battled legal threats, Parkinson's disease, and the threat of bankruptcy

Dying dream of Doctor Death

Dr Gunther von Hagens has battled legal threats, Parkinson's disease, and the threat of bankruptcy