Act now to support vital small charities

If small charities fail communities will suffer, and public services and the treasury will have to pick up the tab.

This article was originally featured in Third Sector online. You can view the original article here.


For some time before coronavirus dominated all our lives, Lloyds Bank Foundation started working with partners to bring together all the different data there is on small charities in one place.

It seems especially apposite now, so we recently launched the Small Charities Data hub.

As a result of this endeavour we have been able to get a snapshot of the state of the small charity sector coming into the pandemic from five years of data, from the makeup of charities – including their workforce and skills and capabilities – to the type of services they provide, as well as their finances.

We can clearly see the stark reality that charities faced, as income streams had slowly been declining over the five years before the pandemic.

However, it’s worth starting with some of the basics that few outside our sector might recognise. There are 160,377 small charities. They make up 96 per cent of the sector and yet receive only 18 per cent of its income.

Taken together, they are a major economic force. Small charities with a workforce of fewer than 25 employ more than 400,000 people. That’s well over three times as many as the Army. Or the Department for Work and Pensions. Just under a third the size of the NHS.

And that is not taking account of the large numbers of volunteers – on average, there are about four for every paid member of staff. By anyone’s standards, that is a force to be reckoned with; perhaps especially because it is so widely distributed rather than concentrated.

The benefit of that has been spotlighted by the Covid-19 crisis. From analysing the monitoring reports our grant-holders submitted, we can see they have been right on the front line, adapting to provide vital services to people affected by Covid-19, from essential food to toiletries.

So many of these charities even provided internet and phone data to people who would otherwise have had no access to support and crucial information, as so much went online and physical services closed.

Most of these charities, regardless of their focus area, began supporting people’s mental health needs as more people were affected by mental ill-health, and the risk of suicide and self-harm has risen.

They have also been a vital lifeline to people affected by issues that have been exacerbated by the crisis – those exposed to domestic and sexual abuse, isolated refugee communities and the homeless, for example.

And yet this has often come at the cost of staff wellbeing, with people and services under intense pressure to respond to rising demand and adapt their services.

There are also mounting concerns that the welcome focus on short-term, immediate support in the crisis has been provided at the expense of longer-term support that will be critical to the continued survival of these charities.

This comes against the backdrop of a pattern of reduced government support pre-crisis.

In spite of the welcome £370m provided for small and frontline charities in the crisis, data on the hub shows government income to small charities declined by 20 per cent over a five-year period up to 2017/18.

A staggering 61 per cent of small charities report that they subsidise public service contracts with income from other sources, and one in five makes a loss.

Problematic at the beginning of the year, this will turn into an existential crisis for many as we go into 2021 – with 43 per cent reporting that they will lose half their annual income, more than a third having already dipped into their reserves in the last quarter of 2019.

The hub cites NCVO data that shows nearly a quarter of charities with an income of less than £100,000 have no reserves.

The impact of this may not be as dramatic or headline-grabbing as the financial woes facing many of our larger, household-name charities, but it will be felt just as keenly by those they serve, many of whom are the most marginalised in society – especially if they disappear altogether.

Ultimately society, public services and the Treasury will end up picking up the tab of failed services.

Like many funders, we are doing what we can to be supportive of these frontline charities.

We are being flexible with our grant-making, ensuring we commit to sustained funding rather than short-term grants, and supporting charities beyond money alone to help build capacity and capabilities.

But we can only do so much with our own limited resources. That is why we’re calling on the government to act now.

The Small Charities Data hub provides an evidence-based cry from the very heart for national and local government to understand the ‘value of small’ and ensure it is supported to do what it does best in our local communities.

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