Cash flow crisis as nearly half of charity reserves set to run out ‘within 12 months’

Almost half (47%) of UK charities expect their reserves to run out within the next year, according to new research commissioned by Ecclesiastical Insurance.

Over 250 charities were surveyed as part of a YouGov poll to assess the impact of COVID-19 on the sector, and over half (55%) of respondents said they were concerned about a loss of funding, with seven out of ten (71%) charities citing COVID-19 as a reason for their increased concern.

The results showed that 12% of charities expect their reserves to run out in the next three months, rising to 17% within the next six months. A fifth (20%) said that they were concerned about not surviving the next 12 months, increasing to 28% over the next one to three years.

The worrying stats highlight the challenges facing charities in a sector that has already been rocked by the impact of austerity and uncertainty surrounding Brexit. Earlier this year the Charity Commission published figures showing 5,843 charities were forced to close between April and June, up from 4,900 the previous year. The sector remains under pressure to keep providing services against a backdrop of decreasing funding and increased demand.

Ecclesiastical Insurance has developed a fundraising hub to support charities through these challenging times. The hub offers tools and guidance including tips for researching possible donors and funders as well as checklists for grant applications. The resources in the hub are designed to help charity customers manage their fundraising risks over the long-term and help identify new opportunities.

Angus Roy, niche director for charity at Ecclesiastical, said: “The findings from this research make for sobering reading, but they’re no surprise given the extraordinary year we’ve had so far. Charities have become used to dealing with challenges, but this year has given us a perfect storm of a loss of funding through fundraising activities, a reduction in giving from corporate partners, as well as the general public, and an increase in need has left many charities at crisis point.”

In spite of the bleak findings from the survey, there are some positive signs. Charities that have been able to adapt to the restrictions imposed and shift how they work, either through embracing new ways of working (83% have moved to digital methods) or adapting their offer (52% using social distancing/PPE to continue working with patrons), are seeing the benefit.

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