Challenges facing the third sector

Jemma Smith, Editor
November, 2022

The charity sector does a lot of good but it still faces its share of challenges…

Cost of living crisis

With inflation now at 9% and the cost of everyday essentials rising the current crisis is taking a toll on everyone's finances. As a result, charities are experiencing increased demand as people struggle to meet the cost of everyday life. According to research by the Charities Aid Foundation (CAF) 86% of charitable organisations are worried about the effect the cost of living crisis will have on those that depend on their services, while a further 71% expressed concern over managing increased demand to their services.

However, this isn't the only challenge. The running costs of charities are increasing but their income is falling as people have less to give. In fact, CAF research has highlighted that between January and April 2022 an estimated 4.9million fewer people said they donated to charity when compared with the same months in 2019. Smaller charities are particularly vulnerable to the decrease in donations and declining government funding and will likely be the worst affected by the crisis.

Financial sustainability

CAF research has identified generating income and achieving financial sustainability as the main challenge facing charity leaders. Another pressing challenge is a reduction in government funding.

Income from both local and central government, as well as income from grants and government contracts has declined in recent years. Government spending cuts have already resulted in charities having to scale back their efforts and reduce or close vital programmes.

The reduction in government funding will primarily effect larger charities, who depend on government income.

However, the CAF research has given a glimmer of hope. According to the report the majority (81%) of charity leaders are optimistic about the future of their organisations, with the level of optimism increasing in line with income. Leaders are more optimistic about their own organisations rather than the sector as a whole (50% optimistic) and unsurprisingly optimism is lowest among small charities with an income of less than £1million.

Meeting demand for services

Over the past couple of years the COVID-19 pandemic, and now the cost of living crisis, has resulted in charities experiencing overwhelming demand for their services. Many organisations expect this demand to continue as the county's economy recovers.

People are struggling to pay their bills, rising energy prices mean people are struggling to heat their homes and the rocketing cost of food means it's more expensive to put meals on the table. People's wages aren't stretching as far as they used to causing more people than ever to reach out to charities for help and support. Couple this with the increased financial pressure that third sector organisations are facing and it's no surprise that 30% of charity leaders are concerned about the increased demand for their services (CAF research).

Volunteer retention

The NCVO Civil Society Almanac 2022 reported that 16.3 million people volunteered through a group, club or organisation in 2020/21 but that levels of formal volunteering fell significantly between 2019/20 to 2020/21, although this can largely be attributed to the pandemic. Volunteers are vital to third sector organisations and trying to maintain volunteer numbers (as well as recruit new volunteers) is a constant challenge for charities.

Workforce diversity

Diversity in the charity sector is an issue that needs to be addressed. While women make up two thirds of the voluntary sector workforce, 90% of the workforce is white (NCVO Civil Society Almanac 2022) meaning that less there is ethnic diversity in the voluntary sector (10%) than in both the public (14%) and private (13%) sectors.

One in five (23%) of the voluntary sector workforce identify as disabled.

While many organisations have drawn up plans to address issues of equality, diversity and inclusion in the workplace the main barriers affecting their efforts to be more inclusive include limited financial resources, staffing capacity, lack of human resources skills, knowledge and capacity and a lack of equality, diversity and inclusion knowledge or skills.

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