Small and local charities offer a range of economic and social benefits and play a vital role in their communities, a new study has found.

Independent research, launched today, reveals that when tackling social issues like homelessness, domestic abuse or mental ill health, smaller charities have a distinctive impact. They also generate benefits through spending and investing more in local areas; with one charity generating £3.25 in value through volunteers per pound of funding, and others generating as much as three times more in additional funding than their public funding.

The research highlights the significant challenges facing smaller charities despite their clear benefits for people and communities. There is a critical mismatch between what smaller charities do and the people they help – which public bodies should find attractive - and how public bodies actually fund, commission and contract services and measure value, which instead favours larger providers. As a result 84% of local government funding is actually going to larger charities.

MRANGWith the Government currently consulting on its new Civil Society Strategy, the need for specific action at national and local level to support smaller charities is urgent.

The Value of Small was commissioned by Lloyds Bank Foundation for England and Wales and conducted by an independent research team comprising the Centre for Regional Economic and Social Research (CRESR) at Sheffield Hallam University; the Institute for Voluntary Action Research (IVAR) and the Centre for Voluntary Sector Leadership at the Open University. The researchers immersed themselves in four local areas - Ealing, Bassetlaw, Salford and Wrexham – to carry-out in-depth studies of small and medium-sized charities (those with an income of £10k to £1m) tackling issues such as homelessness, unemployment and helping refugees to integrate. Over 18 months they analysed a range of evidence and spoke to more than 150 stakeholders to understand the distinctive contribution and value of smaller charities operating at a local level and the challenges they face.

The research findings show that smaller local charities combine three distinctive features in how they support people and communities, which sets them apart from both public-sector providers or larger charities:

  1. Who smaller charities serve and what they do: through plugging gaps left by other organisations; being the ‘first responders’ to people in crisis, and for creating safe, familiar spaces where people can receive practical support or be quickly linked to other local services because of the charity’s local networks. Examples in the research included the experiences of homeless people and refugees who were not being helped by public services but got the support they needed from small and local charities.
  1. How smaller charities work: building person-centred relationships with clients for longer; being known for their ‘open door approach’ and understanding of local issues, and for being quick to make decisions because of flatter management structures. and reflecting more closely the diversity of their local communities through their staff and volunteers. Examples in the research included charities providing mental health services that were more welcoming and engaging for people who were turned away from public services because the issues they were facing were too complex or didn’t fit those organisations’ missions.
  1. The role smaller charities play in their communities: using their well-established and far-reaching networks toact as the 'glue' that holds communities together. Examples in the research include charities helping communities cope better with funding cuts and service fragmentation.

This combination of distinctive features in smaller charities is greater than the sum of their parts and offers additional benefits including: individual value for their clients, such as building confidence and self-esteem to help them prepare for and secure employment; economic value through charities buying goods and services locally and added value through recruiting more volunteers than larger charities and bringing in new funding from trusts and others which typically can triple the income they received from the public sector.

Lloyds Bank Foundation and the researchers behind The Value of Small are together calling for national and local action to protect, promote and develop smaller charities to sustain their distinctiveness including:

      i.        Action on funding: greater use of grants by the public sector and that more flexible, accessible and proportionate tender and procurement processes are used for the contracts that remain;

     ii.        Action on social value: consistent and effective implementation of the Social Value Act 2010 with public bodies required to formally account for social value around a broader definition that recognises the distinctiveness of smaller charities;

    iii.        Action to sustain healthy local ecosystems: preserving and protecting the role of smaller charities and the long-term and trust-based relationships they generate.

Paul Streets, Chief Executive of the Lloyds Bank Foundation for England and Wales said in response to the research:

Paul Streets“For over 30 years we have funded thousands of small and local charities knowing their work changed lives, but this research sets out why - they’re distinctive in who they serve, what they do and how they work. And this has real benefits for the people in need they serve, communities and the public purse. Yet so many small and local charities are under-pressure and under-funded from cuts and the rush to ever larger contracts.

“From Carillion, to Probation privatisation, to Grenfell Tower and now with this research, the evidence is overwhelming - big contracting doesn’t work and people and communities value small and local charities. Yet too little has changed - this must now be a call to arms and action. We will play our part in funding and supporting charities, but we call on Government to put smaller charities at the heart of their new Civil Society Strategy and for local councillors and commissioners to change how they fund and commission. Supporting small and local charities is win, win. There is not a moment to lose.”

Chris Dayson, Centre for Regional Social and Economic Research at Sheffield Hallam and leader of the research team said:

Chris Dayson“The findings of our research support and strengthen the evidence base about the value of smaller charities by identifying three distinctive features - their service offer, their approach, and their position - and highlighting the vital role they play within ecosystems of local service provision. The research has also, for the first time, made an explicit link between these distinctive features and the social value smaller charities create for individuals and the wider economy.

“However, our research has also highlighted some major challenges that smaller charities face convincing funders of the need for and value of their work. These challenges are heightened by the pressures of seemingly permanent austerity which have led to a funding environment that favours larger charities over smaller ones. In response, we call for strategic action – on funding, social value and sustaining healthy local ecosystems – that require a long-term commitment and investment by the public sector, independent funders and larger charities at a local and national level.”

Access the full report on the CRSER website or for the summary report click here

For more information contact Jon Narcross, Press and Communications Officer (0207 378 4619)