Cash flow crisis: Nearly half of charity reserves set to run out "within 12 months"

23 November 2020

Almost half (47%) of UK charities expect their reserves to run out within the next year, according to new research.

  • Impact of COVID-19 has forced UK charities to use reserves
  • Lack of fundraising opportunities and increase in demand blamed

Ecclesiastical Insurance commissioned a survey with YouGov to build a picture of the impact that Coronavirus has had on the charity sector.

Over 250 charities were surveyed with over half (55%) saying they were concerned about a loss of funding, with seven out of ten (71%) charities citing COVID-19 as a reason for their increased concern.

The results showed that 12% of charities expect their reserves to run out in the next three months, rising to 17% within the next six months.

A fifth (20%) said that they were concerned about not surviving the next 12 months, increasing to 28 per cent over the next one to three years.

The worrying stats highlight the challenges facing charities in a sector that has already been rocked by the impact of austerity and uncertainty surrounding Brexit.

Earlier this year the Charity Commission published figures showing 5,843 charities were forced to close between April and June, up from 4,900 the previous year – an increase of 19 per cent. As we head into a second lockdown the sector is under pressure to keep providing services against a backdrop of decreasing funding and increased demand.

Ecclesiastical Insurance has used its position as a specialist partner to the charity sector to develop a fundraising hub to support charities through these challenging times. The hub offers easy-to-use tools and guidance including tips for researching possible donors and funders as well as checklists for grant applications.

The resources in the hub are designed to help charity customers manage their fundraising risks over the long-term and help identify new opportunities.

Angus Roy, Niche Director for charity at Ecclesiastical, said: “The findings from this research make for sobering reading, but they’re no surprise given the extraordinary year we’ve had so far.

“Charities have become used to dealing with challenges, but this year has given us a perfect storm of a loss of funding through fundraising activities, a reduction in giving from corporate partners, as well as the general public, and an increase in need has left many charities at crisis point.”

In spite of the bleak findings from the survey, there are some positive signs. Charities that have been able to adapt to the restrictions imposed and shift how they work, either through embracing new ways of working (83% have moved to digital methods) or adapting their offer (52% using social distancing/PPE to continue working with patrons), are seeing the benefit.

Angus added: “We fully appreciate the pressures that charities are currently under and know that it might seem counter intuitive to look beyond the immediate need, however we would encourage charities to make the time to assess the opportunities, not just the problems that this new environment presents.

“We have already seen charities identifying new means of delivering existing services, providing new services and looking at funding opportunities to secure the future of their organisations. COVID-19 has challenged us in ways we’ve never experienced before, but it also gives us that chance to be bold and seize on new opportunities.”

Richard Sagar, Policy Manager, Charity Finance Group, said: This research helpfully highlights what many in the sector will already know, that so many charities are at breaking point, struggling to provide support for the most disadvantaged in our society at a time when that support is never more needed.”

“But it also points to positive signs, that so many charities have adapted the way they work, to better support those most in need. However, even with the flexibility and resilience they have shown, additional financial support will be crucial if we want to ‘build back better’ after this crisis.”

The full findings of the Charity Barometer will be published in December 2020.