Posted by: the3rdi | May 25, 2010

Charities remain optimistic despite being hit hard by recession

More than four out of five charities and social enterprises have been badly affected by the economic downturn, yet a surprising 100 per cent remain optimistic about the future, according to the findings of a survey (released today) conducted by award-winning social enterprise CAN Mezzanine.

The findings are based on a survey (conducted in April 2010, (just before the General Election) of around 70 Third Sector organisations – mostly small charities and social enterprises based in CAN Mezzanine’s three office  “hubs” in London. They represent a microcosm of the sector, ranging from small single-issue charities employing just two people to the largest organisation, PohWER, which employs around 170 people.

Organisations were asked how the recession had affected their business over the past 18 months:

·         Half reported a reduction in cash flow.

·         One third reported a drop in donations and grants.

·         All organisations reported making cuts in overheads, with half reducing staff costs and half targeting other outgoings.

Typically, small charities reliant on central or local government funding are struggling to win contracts and many voluntary and community organisations are suffering from lack of secured funding. Membership bodies are finding it hard to retain existing members and recruit new ones.

Two thirds of organisations in the survey are planning for further cuts in overheads over the coming year. Whilst the impact of the likely squeeze on public sector funding over is uncertain, one in six anticipate that the worst is yet to come as competition for a likely dwindling number of grants becomes more intense. Nearly all are sceptical about the ability of  government to provide more support for the Third Sector.

To meet challenging times ahead most organisations are seeking new sources of income and innovation:

·         Two thirds are planning to expand their trading activities

·         Half are exploring new markets

·         Some are looking at mergers and other collaborative work.

Organisations who, predictably, report an increase in business, are those providing business and financial services to not-for-profit organisations, such as GK Partners (a business advisory service to the Third Sector) and the Charity Finance Directors Group.

Acting CFDG Chief Executive Officer David Membrey said:  “More charities are seeking our help and support and we are expecting a better year ahead. But there may be an indirect impact on us as, undoubtedly, some of our member charities will merge and other will fold, therefore reducing our number of members and income.”

“These findings show how robust and inventive the Third Sector is in combating the negative impact of the recession,” says CAN Chief Executive Andrew Croft. “Whilst these are undoubtedly challenging times and many organisations are struggling, this may present an opportunity for social enterprises – as suggested from the survey – to diversify and increase trading. There is also considerable support there for charities reliant on state funding to become more entrepreneurial. But for those charities whose primary focus on campaigning, advocacy or service delivery, the entrepreneurial route is not necessarily the answer. Good times are ahead for some, although the journey may be painful in the short term. But we are delighted to see All Party support for the Third Sector.”

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