A word used regularly to characterise 2022 was “permacrisis”. The uncertainty caused by a series of socio-economic shocks, including the war in Ukraine, the aftermath of Covid and the global energy crisis has made for a challenging environment in which to make long-term strategic plans.
The first six months of 2023 have continued to be marked by economic uncertainty and volatility. While there is cautious optimism more recently, with the economy returning to growth in April and hopes that the UK avoids a recession this year, combined with falling energy prices and slightly lower inflation, there continue to be headwinds.
There has been much talk of the “triple whammy” impacting on charities – with i) a challenging fundraising environment, ii) increased cost pressures and iii) rising charitable need and demand for what charities offer. The cost-of-living crisis, which exacerbates each of these aspects, therefore continues to be top of mind, and from these multiple lenses. With an overall decline in living standards, charities are often stuck between a rock and a hard place. The DemosPwC Good Growth for Cities Index also showed that public priorities are turning towards immediate needs.
A shift in tone
However, the tone of discussions with charity trustees and leaders has started to shift. There is a greater focus on a longer time horizon, no longer solely focused on the here and now, but also moving towards more strategic matters.
When speaking with charity trustees and leaders, the topic of financial sustainability inevitably comes up and is a recurrent topic of discussion. The importance of maximising income generation, diversification of income, cost reduction and delivering efficiencies remain prominent in many charity risk registers.
Another key area that appears on charity risk registers relates to its people, and, in particular, recruitment and retention remains high on the agenda. The labour market continues to be tight. ONS growth in regular pay (excluding bonuses) was 7.2% in February to April 2023, the largest growth rate seen outside of the pandemic. Having a fit-for-purpose workforce is critical for charities to deliver their charitable purpose, but skilled candidates continue to be in short supply. It is also a challenge for charities to pass on higher costs to their funders and supporters.
These economic factors combined mean that charities will need to continue to be agile to react and respond to these trends and changes, including embracing innovation and transformation, and thinking differently about how they operate to maximise the impact they make.
Daniel Chan is a director at PwC
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