Charities have to cut services, lay off staff and reduce their opening hours as analysts warn parts of the sector are now ‘broken’ amid the cost-of-living crisis.
Soaring utility bills and other costs are weighing heavily on industry organizations, with some forced to turn off the lights and work in the dark in an effort to save on electricity.
Research by the Pro Bono Economics think tank has found that around half of charities in the UK are now using their reserves to meet operating costs, a situation it described as “unsustainable”.
In a report on the state of the charity sector due out next week, titled Breaking the Dam, Pro Bono Economics concludes that organizations need to scale back the help they can offer.
Nicole Sykes, director of policy at the think tank, founded by former Bank of England chief economist Andy Haldane in partnership with Nottingham Trent University, said the charity sector had expanded in the wake of austerity, but now it is threatened.
“We’ve talked a lot about the charity sector being at breaking point, and I think there are now pieces of the industry that are broken, at the end of the day,” he said The independent.
“People leave without help. We have long said that the safety net provided by charities is fraying. There are now holes that people are falling through.
“There are charities that give hardship grants to people who have fallen from grace. And they’ve had to cap and restrict those grants. So while your criteria for “falling on hard times” could have been much higher, they are now ones who truly face destitution.
“So there are people who are borderline, who haven’t quite fallen into that really bad state, who don’t get support. But this then has consequences for [their] mental health and all. It’s the sort of thing where charities just have to retire.
“Due to rising costs in general, we hear particularly small charities saying they need to lay off staff. They just can’t meet the demand that’s out there.”
Ms Sykes added that the 2008 financial crisis and the austerity that followed saw the sector expand: ‘So now we have a country where we rely much more on charities, who provide much more to the more vulnerable and tested its resilience just as we are testing it now.”
Charities are struggling with increased demand fueled by the cost-of-living crisis in the wake of the Covid pandemic, during which one in four people have seen their income drop by at least 40%, according to recent research published by the ‘University of Birmingham.
Many are also under pressure to do more with less. Macmillan Cancer Support staff numbers are down by 15% from pre-pandemic levels, while The Children’s Society cut its staff by 8% last year.
Staff at homeless charity Shelter recently warned they risked being on the street as they threatened a strike over a lower-inflation pay offer.
Sam Mercadante, policy and insight manager at the National Council for Voluntary Organisations, warned that austerity policies have eroded public services over the past decade and that “charities and community groups have increasingly stepped in to fill the gap”.
In total they provide more than £15bn worth of public services every year, he estimated. But she warned that many are facing a desperate choice this winter.
“Charities know their value to communities and will not walk away in times of need. But many are now wondering whether they shouldn’t spend everything they have to get through the winter, knowing full well that this will mean they will have to close later.
“We will see the voluntary sector shrink over the next few months, leaving people with nowhere else to turn,” Mercadante added.
Neil Heslop, chief executive of the Charities Aid Foundation, said charities were at the forefront of helping communities cope with the hardships of the cost-of-living crisis “but at the same time they were facing a triple threat of declining donations, rising costs and growing demand”.
He said ministers could help by extending support to those struggling to pay their energy bills beyond March next year.
Smaller charities have been hit especially hard. Heeley City Farm, a community farm in Sheffield, this week announced plans to lay off nearly half of its staff as it struggles to survive.
The Social Workers’ Benevolent Trust, which has seen a spike in demand, is among the organizations that have been forced to lower their maximum grants to those in financial difficulty. And Kidney Care UK said it has seen an over 200% increase in applications for hardship grants to help people with their heating bills.
As demand has soared, Citizens Advice found that aid requests in the three months to October, the latest period for which data is available, were 85 percent higher than in the same period last year. . And The Trussell Trust said food banks distributed a record 1.3 million emergency food parcels between April and September this year.
Organizations that require large amounts of energy are also badly affected, such as charities that run community centers and recreation centers across the country.
The charity that runs the Rye Leisure Center in East Sussex announced last month that it would close for the winter after its annual energy bill dropped from £8m to £20m. Experts fear that others will have to shut down permanently.
This concern was echoed by Sykes, who also said many charities would appreciate government support for measures to make them more energy efficient and reduce bills in the long run.
The current six-monthly support package, worth £18bn, will expire at the end of March. The scheme discounts the wholesale cost of energy for all businesses, charities and public sector organisations.
Ministers said they would continue to support some of them, as part of a more targeted scheme, after April, but have yet to determine who will benefit. The results of a review are expected to be published later this year.
A spokesman for the Department for Digital, Culture, Media and Sport admitted that civil society organizations would be “key in supporting communities and families through the winter”. This is why ministers stepped in to help charities with their energy costs this winter, they added.