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Charities explore 'drastic' measures to overcome austerity

Charities are set to take “drastic” and “bold” steps to overcome economic challenges in 2013, such as merging, implementing pay freeze, redundancy schemes and exploring digital fundraising methods.

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A report by PwC, Charity Finance Group and the Institute of Fundraising found more than nine out of 10 (93 per cent) charities are experiencing a squeeze on fundraising, although there has been an uplift in optimism for the outlook for the next 12 months.

About two thirds (61 per cent) of charities were optimistic and a third (33 per cent) worried about the coming year, tipping the balance from the previous year’s report where 47 per cent were optimistic and 47 per cent worried.

In 2012 five per cent of charities merged - such as Prostate Action and Prostate Cancer UK - and 69 per cent had undertaken collaborative activity with others, most commonly in the form of joint programmes and service operations. This trend is likely to continue in 2013, with 16 per cent exploring the possibility.

Merging still tends to be viewed by the sector as the “last resort” rather than a prudent strategic move - particularly for charities with an established brand and reputation built up for years. The authors of the report stress, however, mergers should be explored if it is in the best interest of beneficiaries and they encourage discussions to start as early as possible.

Charities are also moving to forge closer relationships internally, particularly between finance and fundraising, with just 15 per cent of respondents saying there was no engagement at all between the two teams - an improvement on previous years. The report suggests a strong partnership between the two divisions is important in good times but “absolutely crucial” when things are difficult to devise funding strategies and ensure the charity is solvent.

Another area marked out for opportunity is the use of new technologies, such as cloud computing to increase worker efficiency and making better use of CRM data for commercial use.

As austerity continues to hit the sector, more than a quarter (29 per cent) of charities plan to implement a pay freeze and 23 per cent indicated redundancies were on the cards in the coming year. Almost two thirds (64 per cent) were also planning to dip into reserves to maintain serves and fund operating costs.

Caron Bradshaw, Charity Finance Group chief executive, says: “The sector is clearly doing its bit: the results show more charities are expanding trading activity and exploring merger; however we know unnecessary trading restrictions and pensions legislation still pose barriers in these areas. We’re hoping Government will use Budget 2013 as opportunity to step up and meet us half-way on some of the long-standing issues that threaten sector sustainability.”

Peter Lewis, Institute of Fundraising chief executive, says while there is a squeeze on statutory funding and increased demand for services, there is reason to be optimistic.
He adds: “Donors are continuing to give to their favourite charities, and taken together with the generally healthy levels of staff morale in charities there are clear signs of greater confidence for the year ahead.”

This year’s annual “Managing in a Downturn” survey was completed by 427 respondents from small, medium and large charities.

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