The emerging impact of the recession on the voluntary and community sector A review of recent surveys and evidence NCVO/OTS Recession Summit, June 2009 Karl Wilding & Elizabeth Chamberlain NCVO Public Policy Contact: [email_address] John Mohan Third Sector Research Centre Contact: [email_address] TSRC Third Sector Research Centre

Historical evidence base US Great Depression – proportion of household income remains constant Major gifts – track stock / property markets Postwar recessions in USA – minor long-term effects; relatively swift recovery Effects on organisations therefore depends on mix of income sources New organisations continue to be formed – no recessionary impact Evidence is reliable and representative but RETROSPECTIVE

US Great Depression – proportion of household income remains constant

Major gifts – track stock / property markets

Postwar recessions in USA – minor long-term effects; relatively swift recovery

Effects on organisations therefore depends on mix of income sources

New organisations continue to be formed – no recessionary impact

Evidence is reliable and representative but RETROSPECTIVE

Underlying stability?

Evidence review - November 2008 We concluded from a mixed evidence base that: Income streams do not necessarily decrease in downturns. Charitable giving and government funding are critical due to their role in the income mix. The sector is poorly capitalised and unable to deal with income/cashflow problems, especially some sectors (eg employment) Volunteering: upturn in enquiries likely, but capacity constraints Need will increase: mental health, advice, worklessness Impact will be variable: by size, sub-sector, geography So, what do recent surveys suggest?

We concluded from a mixed evidence base that:

Income streams do not necessarily decrease in downturns. Charitable giving and government funding are critical due to their role in the income mix.

The sector is poorly capitalised and unable to deal with income/cashflow problems, especially some sectors (eg employment)

Volunteering: upturn in enquiries likely, but capacity constraints

Need will increase: mental health, advice, worklessness

Impact will be variable: by size, sub-sector, geography

So, what do recent surveys suggest?

Recent impact: impact on the sector lags impact on the wider economy, but is starting to emerge What has been the overall impact of the economic downturn? Charity Commission recession survey, March 2009 (D/Ks excluded) Charity Commission survey suugests 52% affected by downturn; of these, 58% have seen funding fall (which suggests 30% of population have seen income fall) NAVCA members report funding environment for small/medium charities worsening, a finding echoed by regional surveys Has income fallen in the downturn? % answering yes Charity Commission recession survey, March 2009

Charity Commission survey suugests 52% affected by downturn; of these, 58% have seen funding fall (which suggests 30% of population have seen income fall)

NAVCA members report funding environment for small/medium charities worsening, a finding echoed by regional surveys

Recent impact: other soundings Charitable giving: conflicting evidence Positive: Comic Relief + other large appeals Negative: PWC – 20% ‘anecdotal’ fall in fundraising; 10% decline in legacies Philanthropy Positive: Coutts – philanthropists still planning to give Negative: high profile philanthropists rowing back (Hunter) Trusts & Foundations Mixed: AMRC/ACF: foundations either maintaining grants or planning to cut back as investment income falls (ACF: 47% expect reduced budgets) Workforce/Volunteering Numerous examples of scaling back paid workforce: both redundancies, reduced hours (smaller organisations more likely to reduce hours) Anecdotal evidence of increased volunteer interest (NT, VSO), esp from professionals

Charitable giving: conflicting evidence

Positive: Comic Relief + other large appeals

Negative: PWC – 20% ‘anecdotal’ fall in fundraising; 10% decline in legacies

Philanthropy

Positive: Coutts – philanthropists still planning to give

Negative: high profile philanthropists rowing back (Hunter)

Trusts & Foundations

Mixed: AMRC/ACF: foundations either maintaining grants or planning to cut back as investment income falls (ACF: 47% expect reduced budgets)

Workforce/Volunteering

Numerous examples of scaling back paid workforce: both redundancies, reduced hours (smaller organisations more likely to reduce hours)

Anecdotal evidence of increased volunteer interest (NT, VSO), esp from professionals

Future impact: like consumers on the high street, VCOs are low on confidence, fearing the worst. Sector leaders’ net confidence has been negative for 2 quarters, falling rapidly Confidence in future prospects: net balance, 2008 A number of regional surveys suggest confidence around incoming resources is in short supply: 55% of survey respondents in the NE expect funding to fall; Reflecting the Charity Commission’s survey, respondents to surveys in the NE (51% increase) and SE (66%) expect increases in demand for services; 82% of respondents in London not confident they can meet future demand … with concern over future ability to provide services. Will the downturn affect services? Charity Commission recession survey, March 2009

A number of regional surveys suggest confidence around incoming resources is in short supply: 55% of survey respondents in the NE expect funding to fall;

Reflecting the Charity Commission’s survey, respondents to surveys in the NE (51% increase) and SE (66%) expect increases in demand for services; 82% of respondents in London not confident they can meet future demand

The impact of recession will be variable, a reflection of different income streams, balance sheets and management capabilities. Funding source is variable between sectors Funding source, by sector, 2008 The 40,000 organisations that receive government funding are concentrated in subsectors such as employment, advocacy, umbrellas, education and social services. Most subsectors are poorly capitalised – those with assets appear exceptional Reconfiguration appears most likely in mid-sized organisations. … whilst assets are not a secure basis for many Net assets, expressed as number of months’ expenditure

The 40,000 organisations that receive government funding are concentrated in subsectors such as employment, advocacy, umbrellas, education and social services.

Most subsectors are poorly capitalised – those with assets appear exceptional

Reconfiguration appears most likely in mid-sized organisations.

Contemporary evidence base Poor quality perception surveys What is the baseline for comparison? Can’t rule out respondent bias Unrepresentative sampling and unrealistic extrapolation Evidence is partial, unrepresentative and prospective

Poor quality perception surveys

What is the baseline for comparison?

Can’t rule out respondent bias

Unrepresentative sampling and unrealistic extrapolation

Evidence is partial, unrepresentative and prospective

What’s the baseline? Normal years see organisations experiencing falling income Larger charities Proportion of charities experiencing an increase in income, by decile Base: 56,663 56% 56% 56% 56% 56% 57% All 66% 66% 69% 67% 71% 68% 90-100 60% 59% 61% 60% 62% 60% 80-90 58% 59% 58% 58% 58% 56% 70-80 58% 58% 58% 57% 58% 54% 60-70 55% 54% 56% 55% 55% 52% 50-60 53% 54% 53% 53% 54% 49% 40-50 54% 52% 53% 55% 52% 54% 30-40 54% 54% 53% 54% 52% 58% 20-30 54% 52% 52% 53% 54% 60% 10-20 52% 50% 50% 49% 48% 59% 0-10 2008 vs 07 2007 vs 06 2006 vs 05 2005 vs 04 2004 vs 03 2003 vs 02 % Decile

Emerging conclusions Initial estimates of potential problems still hold Confidence is falling, both in relation to incoming resources and ability to meet demand for services Some is well placed: one third of organisations have seen a fall in income, which they believe is recession related But a mixed evidence base means we cannot yet say for certain what the impact on some income streams – especially charitable giving Government grants and contracts – esp post 2011 – are a major cause of concern and uncertainty Data quality is questionable, so interpret trends with care TSRC Third Sector Research Centre

Initial estimates of potential problems still hold

Confidence is falling, both in relation to incoming resources and ability to meet demand for services

Some is well placed: one third of organisations have seen a fall in income, which they believe is recession related

But a mixed evidence base means we cannot yet say for certain what the impact on some income streams – especially charitable giving

Government grants and contracts – esp post 2011 – are a major cause of concern and uncertainty

Data quality is questionable, so interpret trends with care