Funding Drain Threatens Future Of Third Sector

11th September 2012

Reserves running out fast for small and medium-sized charities.

Smaller charities are disproportionately feeling the brunt of funding cuts, according to figures released today by the Scottish Council for Voluntary Organisations, with the majority of them spending more than they have coming in. Despite modest income growth for larger charities and housing associations in 2011, turnover has still not picked back up to the 2009 level for other charities.

Top-line results include:

The third sector's income was £4.5bn in 2011 - modest growth compared to £4.4bn in 2010

Across the board many charities saw a sharp drop in income in 2011. As well as smaller organisations, these included some larger players that lost contracts and major trusts which earned less interest on their investments

Excluding credit unions and housing associations, charities' turnover was not yet recovered to the 2009 level, with £3.21bn turnover in 2011 compared to £3.22bn in 2009

Third sector expenditure was £4.3bn in 2011

The sector has posted a slight increase in staff numbers to 138,000 jobs but with only 83,350 fulltime equivalent employees there has been a significant drop in staff hours, more temporary contracts and fewer full-time worker

The sector's assets and reserves have increased slightly to £9bn. Growth of assets held by some larger charities and housing associations is masking major erosion of assets held by smaller organisations

Martin Sime, Chief Executive, Scottish Council for Voluntary Organisations, said:"As income falls short of expenditure, particularly for smaller charities, organisations are being forced to use what assets and reserves they have left to keep their doors open for as long as possible. With limited reserves, which many organisations already dipped into last year, charities are running out of ways to compensate for the funding drain.

"Organisations are working hard to maintain the high quality services they provide to communities across Scotland and keep their staff. With ever growing demand set to skyrocket as the UK welfare cuts kick in, third sector organisations are facing an impossible conundrum. Something will have to give to secure a sustainable future for the sector."

The Scottish Council for Voluntary Organisations is the national body representing the interests of charities, voluntary organisations and social enterprises. The Scottish third sector turns over £4.4 billion a year and employs 137,000 people in over 45,000 organisations. For more on SCVO see www.scvo.org.uk