The current economic environment continues to test the perseverance and resilience of many charities. Charity trustees and leaders are looking carefully to the future and the steps needed to remain on – or to regain – a solid footing. There is no silver bullet, and it may feel like a marathon more than a race.
The UK was in a “technical” recession at the end of 2023, with two consecutive quarters of contracting output – a fall of 0.1% in July to September 2023 followed by a fall of 0.3% in October to December 2023 in the country’s real gross domestic product (GDP). UK growth has flatlined and teetered between months of expansion and contraction for some time now, but it is particularly important from a confidence signalling perspective.
The Office for National Statistics (ONS) reported that the consumer prices index (CPI) continued to rise by 4.0% in the 12 months to January 2024, the same rate as in December 2023. Although this has remained steady, it remains double that of the Bank of England’s inflation target of 2%.
With the ONS reporting that annual growth in regular pay has continued to soften to 6.2% in the three months to December 2023, it is positive that pay is now growing in real terms. The latest data also suggests the UK has achieved a sweet spot, with declining vacancies in the labour market while unemployment remains relatively flat.
State of the sector
New Philanthropy Capital recently launched its State of the Sector 2024 research, which was co-sponsored by PwC. When reflecting on the interesting and thought-provoking research findings, it was unsurprising that a majority of the public wants the government to work in partnership with charities more, as well as a majority also wanting them to offer more support to charities to work in poorer areas. The research encourages a “reset” in the charity sector’s relationship with government and the public sector.
A majority of the public, and particularly those from lower-income backgrounds, also questioned whether charities are working where they are most needed. And, while it was perceived that charities are consulting with their users more, they were feeding into strategic conversations less. This is a timely reminder for charities, particularly where resources are constrained, to focus on where and how their charitable purpose can be delivered most effectively.
It was heartening to learn that charities are more confident using digital technology; however, there are significant financial barriers to doing more. While this resonates strongly, it is all the more challenging with the current economic outlook.
Daniel Chan is a director at PwC
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