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The Cost Of Living Crisis And Fundraising- What Should Your Small Charity Be Considering?

The Cost of Living Crisis and Fundraising- What should your small charity be considering?

The cost of Living Crisis is a big worry for many. With interest rates expected to rise as high as 6%, lack of confidence in the financial markets and the pound crashing, there is lots to be concerned about currently. Whilst it is still early days, fundraisers are rightly wondering what the impact will be on the charity sector and how this will impact fundraising.

The Chartered Institute of Fundraising helpfully teamed up with Pro Bono Economics to share its latest thoughts on the impact of the Cost of Living on Fundraising. Here’s what we took away from the webinar:

What does this mean for the charity Sector?

Pro Bono Economics see six key areas that are pertinent for the charity sector to consider…

  1. Public Spending With government borrowing increasing, this could likely result in cuts and impact charities that are in receipt of government income. This could affect the value of contracts to deliver work. Rising costs linked to inflation coupled with possible cuts to contract sizes will likely have an impact on income. If your charity is reliant on government funding, this could be a risk and something you need to consider – such as how you may diversify your income to reduce that risk and meet rising costs.
  2. Exchange Rates – This is more likely to impact larger charities/ international charities the most, but is also relevant if your charity imports items from outside the country or potentially receives funding in other currencies. There is also likely to be an impact on the wider economy, as the UK imports a lot from abroad. Food costs for example could increase.
  3. Demand – With the cost of living impacting so many people in different ways, we are likely to see more demand for certain charity services. Pro Bono Economics have identified 3 key areas where we could see demand on charities increase:
    • Government have yet to confirm if benefits will link to the rise of inflation, so we are not sure yet if people will receive an uptick in benefits to coincide with rising costs. If this is not the case, then the most vulnerable are likely to be impacted- such as the lowest paid or pensioners
    • Housing – The anticipated increase in interest rates will hit mortgage rates, which in turn will affect rent, making renting and housing even less affordable. This could lead to a new housing crisis.
    • Private Sector could also be impacted, due to rising costs, which could impact business growth and in term affect employment rates, which to date have largely been unaffected.
  4. Income – Attracting donations is likely to be a challenge, as people will have less money to give. Even those with savings may be cautious about their finances with rising living costs and mortgage costs increasing. If this weren’t enough, with rising inflation the donations made will also be worth less in the future than they are now. So for example, a £20 donation could be worth £15 next year and simply won’t go as far as it used to. Charities will also be mindful of Trust income too and that any multi-year grants they have again will be worth less in subsequent years. It is well worth thinking about your organisation’s plan for the rising inflation and how you reflect these in any grant applications – good funders will be expecting charities to have thought about this and factored it in to budgets! On the note of Trusts and Foundations, which we know many of our small charity clients are fundraising from, it is not clear if this area will see a reduction in available income, although judging by previous financial challenges and also looking back to the pandemic, we haven’t previously seen trusts give less. In fact many responded during the pandemic by establishing targeted funds and we may therefore expect funders to do similar for the Cost of Living Crisis- Awards for All have already added this to their criteria and likely others may follow suit. Most will be following the situation closely over the coming period to help determine their funding approaches.
  5. Charity Costs – As costs go up, charities will need to find additional funding for this. Wages and staffing could be a big factor here, with charity salaries already lagging behind other sectors, would a job in the charity sector still be an appealing offer, especially as costs are increasing?
  6. Wealthy Individuals – But it isn’t all doom and gloom for everyone. The government tax cut announcements are likely to positively impact wealthier individuals and with the number of individuals worth more than £1 million increasing over the last decade, this could be a good segment of donors to focus on.

So what can your charity start thinking about  with regards to fundraising now to help you prepare? Here are few Nova tips that we will keep updating as the situation develops…

  • Give your donors options – if they are worried about a monthly regular gift, could they decrease their contributions for a period of time as opposed to cancelling completely? Could membership contributions be paid monthly as opposed to annually?
  • Listen and gather stories from your community – how will the cost of living impact them? What are they worried about? Are your current services geared up to supporting them and are they still relevant?
  • Talk to your donors and funders. Funders and Donors will want to hear how you plan to respond to your beneficiary needs and most importantly how they can help. Keep the messaging focused on your beneficiaries and not so much on your own organisational concerns- such as keeping the lights on and heating the building – whilst these are real concerns, your donors want to hear about your work and how they can support beneficiaries!
  • Diverse your income – are you hugely reliant on one income source? How will the Cost of Living crisis potentially impact that? Where else could you be generating income from? Don’t overlook earned income- many charities adapted to the 2008 financial crisis through earned income ( earned income in charities went from £1 in ever £6 to £1 in every £4 post 2008). This also shows you are being savvy and exploring all possible opportunities.
  • Keep an eye out for any specific and new funding pots launched. The Charity Excellence Framework is a great free resource which can keep you up to date on funding.

Also do use the free resources out there – The Chartered Institute of Fundraising has helpfully launched its Cost of Living Crisis resources for you to use –

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