Many charities will struggle with the long-term financial impact of coronavirus, the latest instalment of a project tracking charities' finances has warned.
Daniel King, professor of organisational behaviour at Nottingham Trent University and one of the report's authors, said that the sector will “still be vulnerable” as Covid-19 restrictions start to lift in the coming months.
King was commenting on the latest survey data released this week from the Respond, Recover, Reset project, which is conducted by NCVO, Nottingham Trent University and Sheffield Hallam University.
The report also issued a wider warning about the financial health of charities, arguing that the crisis had “intensified questions” about the sector’s sustainability.
King added: “We continue to see major challenges across the sector, with overall income expected to fall in all areas in comparison to the financial year before the pandemic.
“However, the extent of this impact varies a lot depending on the size, location and type of organisation.
“Even as restrictions are lifted our results show that organisations are concerned that their income will still be impacted, particularly around trading and investments, meaning that many organisations will still be vulnerable and struggle to cope in the new financial year.”
Income, reserves, expectations
Just under 600 charities responded to the latest wave of the Covid-19 Barometer survey.
Around 30% of respondents said they had seen their income rise in the last month, compared with 50% charities which had seen it fall.
29% said they had less than three months’ running costs in reserves, compared with 21% which have four to six months and 44% which have six months or more.
A third of respondents said that their finances had deteriorated over the last month, while 18% said they had improved and nearly half said finances had stayed stable.
58% said that they thought their finances would be stable in the next month, roughly double the proportion which expects their finances to get worse (30%).
The report said: “With many organisations operating on tight margins, and being dependent on short-term funding, Covid-19 intensified questions about the long-term sustainability of their organisation and the sector as a whole.”
NCVO: Financial impact 'uneven and unpredictable'
Alex Farrow, head of networks and influencing at NCVO, said: “The voluntary sector is huge, complex and diverse.
“This report outlines that Covid-19’s impact has been, and will continue to be, uneven and unpredictable across a sector already facing higher demands on its services.
“While many organisations have been able to build up reserves, half of organisations are using them to cover day to day costs.
“The expected downturn in income – even for those organisations seeing only marginal declines – is worrying not just for the charities and groups involved, but for the lives and communities that they serve.”
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