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New research has shown that the smallest charities in the UK – those with annual incomes of between £25,000 and £1m – have been the worst affected by the recent cuts in public funding.

Smaller charities the hardest hit

Recent research published by the Lloyds Bank Foundation highlights the impact that these funding cuts have had on smaller charities. The report shows that between 2008/09 and 2012/13 charities with annual incomes of between £100,000 and £500,000 have lost 44% of their income from local government.

In the same period, charities with annual incomes of between £500,000 and £1m have lost 40%.

In terms of central government funding, charities with annual incomes of between £100,000 and £500,000 have lost 26% of their funding, whilst charities with annual incomes of between £500,000 and £1m have lost 32% of their central government funds.

Department for Communities and Local Government (DCLG) funding cuts

The table below shows the real change in a selection of the hardest hit departmental budgets between 2010/11 and 2015/16.

The DCLG has taken the biggest hit of any department budget (in percentage terms) since 2010/11 – a staggering 51%.

Department funding cuts smallest charities

Sources: IFS

The communities-focused part of the DCLG’s government budget was reduced by 50% and direct grants to local government fell by 27% in real terms between 2010/11 and 2015/16. The department is now also facing further funding cuts.

As well as some of the other government departments (including the Department for Transport and the Department for Environment, Food and Rural Affairs) the DCLG recently agreed to cut 30% from its budget over the next four years after reaching a deal with the Treasury. The impact of more funding cuts for small charities cannot be understated.

Comment

Paul Wormald, Partner at Hawsons, commented: “Cuts to local authority budgets have in many ways been the silent killer for a lot of smaller charities across England and Wales. Charities are set to be subject to even tighter public funding and, although the challenges are not insurmountable, many smaller charities in particular are facing a difficult future.”

“The recent Lloyds Bank Foundation report found that 23,000 charities closed between 2008/09 and 2012/13, with many of those being organisations with annual incomes of less than £500,000. Without funding, a lot of smaller charities are struggling to stay open.”

“Smaller, local charities often fill niche gaps in community needs and provide invaluable support provisions for disadvantaged people. A lot of these organisations are facing major financial challenges, even in spite of their ongoing efforts to diversify their income streams.  Sourcing and sustaining new funding streams is getting harder; public trust in charities, for example, is at its lowest level since 2007 and of course this is having implications on fundraising and revenue streams.”

More from our charity experts

You can find all of our latest charity sector news and newsletters here.

If you are looking for advice in a particular area, please get in touch with your usual Hawsons contact.

Alternatively, we offer all new clients a free initial meeting to have a discussion about their own personal circumstances – find out more or book your free initial meeting here. We have offices in Sheffield, Doncaster and Northampton.

Paul Wormald is a partner at Hawsons, working in the Doncaster office. He worked previously with two national firms of Chartered Accountants prior to joining Hawsons in 2001. For more information or advice on anything covered in this article, please contact Paul on [email protected] or 01302 367 262.

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