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The cost of living crisis: riding the perfect storm

By Nazreen Visram, director, public sector: head of charities & citizenship at Barclays.

With UK inflation running in excess of 9% this summer, amplified by the economic effects of the war in Ukraine and soaring energy prices, the charity sector is facing a perfect storm just as it begins to emerge from two pandemic-hit years, with both beneficiaries and charities themselves being hard-hit financially.

While the sector is probably more flexible and agile than it was pre-pandemic and perhaps better equipped to meet the challenge, many organisations are having to cope with a surge in demand from people struggling to make ends meet, while grappling with declining funding and rising costs.

Growing concerns

Charity leaders are certainly worried – more than a third say they are concerned their organisations will struggle to survive, according to the Charities Aid Foundation (CAF). Additionally, 86% of charities are worried about the impact of the cost of living on beneficiaries and nearly six out of 10 fear people will either stop giving or not start. More than 70% are concerned about managing increased demands for their services.

In a recent survey of 10,000 charities by FareShare, 90% said their services were being directly affected by the cost of living crisis and three quarters had experienced increased demand in the past year. Citizens Advice says it is making record levels of referrals to foodbanks and other charities that went up 44% in March this year compared to the same time last year – even before the fuel hikes hit.

Funding pressure

There’s clearly pressure on donor funding. Six out of 10 people say they have been worse off over the past six months, nearly a fifth of those have stopped donating and 61% are more selective or making fewer or smaller donations. On the positive side, more than seven out of 10 say they are still planning to give in the next three months.

Research by Pro Bono Economics demonstrates that charity income tends to fall as people’s consumption declines, and is unlikely to keep up with rising inflation.

Additionally, the value of previously committed ‘anchored’ donations and grants is obviously being eroded in real terms and charities’ reserves are also being eaten away by inflation.

Along with the rising cost of goods and services, there’s also pressure to raise salaries to manage potential employee turnover and avoid having to go to the intensely competitive UK jobs market to fill essential skills gaps.

Taking action

There are some practical steps charities can take to offset the impact of the cost of living crisis on their organisations so they can continue to support those most in need.

For example, charities may need to review how their reserves are managed and make urgent changes if necessary to maintain their value against inflation. Pro Bono Economics recommends acting swiftly to reassess demand for services and revising income targets against predictions that high inflation will continue up to 2024.

On the fundraising front, as just one example, it may be beneficial to encourage more donations directly via charities’ own websites, where average giving tends to be higher than via external and third-party donation channels.

It’s now vital to present as many donation options as possible to fundraisers and to ensure they’re provided with practical advice and information on the best approaches to raising money in difficult financial times.

With event-related funding, it’s important for charities to maintain their registration fees, as research shows few people find paying them an obstacle to taking part. It may also make sense to proactively and strategically target younger donors rather than rely on the traditional older donor demographic, given that research shows 80% of under-40s gave in the last three months and an equal number intend to do so next quarter.

With energy prices soaring and set to increase further charities may also find it beneficial to get expert help from specialist energy-saving advisers such as SaveMoneyCutCarbon (SMCC), to help reduce both their energy costs and carbon footprints.

Supporting beneficiaries

Many charities support beneficiaries who are struggling financially by pointing them to useful resources to help them manage their money as effectively as possible – at least, where this is a practical option.

One example is a series of free online events hosted by Barclays Retail Bank, which are open to anyone who wants practical help in understanding the impact of the cost of living crisis and to manage their finances better.

And, again, working with organisations like SMCC can also give charities the tools and support they need to help their beneficiaries to save money on fuel bills, or even to access low-priced or free energy-saving technology.

The value of collaboration

For me, one of the key ways to help combat the cost of living crisis is through greater collaboration with other charities, government bodies, umbrella bodies like ACEVO and with businesses.

Where possible, I think organisations should be looking to form partnerships and alliances to coordinate their efforts, share costs, skills and expertise, maximise income and, ultimately, deliver better services.

Collaborating with businesses can be highly beneficial. At Barclays, we proudly partner with nearly 300 charities – for example, supporting Age UK’s advice line and telephone friendship services for older people, and for Refuge we help fund its online abuse support service as well as employee cyber security and wellbeing projects. And of course, we have a long-standing partnership with ACEVO.

Like Barclays, many companies are passionate about supporting the charity sector wherever they can. Successful partnerships and collaborations with like-minded organisations may be one way that charities can meet and overcome the challenges that come with the cost of living crisis.

Narrated by a member of the ACEVO staff

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