At the time of writing the Covid-19 crisis is ongoing, although there is a light at the end of the tunnel with vaccinations progressing apace. However, while no-one can accurately predict the long-term economic effects of the pandemic, most would agree that the impact will be felt for years – if not decades – to come.

The impact of Covid-19 on fundraising incomes

The loss of fundraising income, combined with an increase in demand, is causing an estimated £10 billion shortfall for UK charities (from a total annual income of £42 billion for the sector). Of course, the effect is far from uniform. Some charities are delivering vital services in direct response to the pandemic, with nearly 80% of charities in the health and care sector reporting an increase in demand. They’re doing more work at a time of reduced income.

Meanwhile, other charities may be no more active, but they are suffering from the effects of lockdowns, social distancing and the resulting loss of fundraising opportunities.

The London Marathon, a huge event for charity fundraising, was forced to go virtual in 2020. It should return in October this year, with both a mass-participation event in the capital and a virtual version, bringing the total to an estimated 100,000 participants. Despite the six-month delay, this is hopefully a sign of things returning to normal. Even so, the best-case scenario from PM Boris Johnson suggests that (in England at least) charity shops and not-for-profit attractions such as museums and zoos will all remain shuttered until at least 12 April. There’s hope that some events can take place over the summer months, with up to 30 people able to meet outdoors from 17 May, and indoor venues opening at half capacity – but it’s hard to plan for these when every milestone is still subject to review.

Grants and government support

To counter this effect, the UK Government is offering some support for charities, while other grant-givers and charity funders are accommodating as many applications as they can by loosening the red tape and offering increased funding. But the competition for grants is undeniably tough right now. In many cases, priority for these funds will inevitably be given to those charities providing key services and supporting vulnerable people during the crisis, leaving other good causes out in the cold.

The Brexit effect on charity funding

On top of the Covid impact, Brexit brings further funding woes. The EU provided around £258 million a year to UK charities, and only a fraction of that remains open to them post-Brexit, leaving a shortfall. It’s a comparatively small amount compared with the total UK sector, but will leave a gaping hole in some charities’ finances, once their agreed funding periods run out. Some of this income may be replaced by a new Shared Prosperity Fund, but the details of that are as yet unclear.

The combined impact of Covid and Brexit means that charities will be increasingly reliant on the generosity of domestic supporters and digital fundraising. It’s a tough ask in "an economic horror show", with unemployment on the rise.

It will certainly be a while before charities can go back to fundraising the way they used to, and they will need to embrace digital alternatives for a good while to come. The charities that can engage with their audiences and win their hearts will be the ones that can most successfully claim a share of their giving too.

Moving to online service delivery

Of course, the impact on charities goes beyond purely financial. The logistics of delivering services have been challenged this past year, with a fantastic 92% of charities increasing their online delivery.

In some cases, this has brought forward work that was already in the charity’s long-term strategy, while for others this shift has been entirely reactive. Either way, the sector’s speed in pivoting their services – often with a team depleted by furlough – has been admirable in its agility.

Getting digital infrastructure up to scratch

However, the decisions we make under duress may not be as robust as we’d like. Once the worst of the crisis is over, it makes sense for charities to take a step back and think about things more strategically. The latest Digital Skills Report shows that there’s been very little improvement in the number of charities that have a digital strategy in place, despite the huge increase in digital working. With that in mind, it’s a good idea to look at your overall digital infrastructure and see if the tactical changes you made in the first UK lockdown are up to the job longer term – particularly before contracts renew for a second year.

Stronger together – collaborations and mergers

For those charities that are really struggling, one possible solution is to join forces and work alongside charities with similar interests. Taken to its ultimate conclusion, this could mean a formal merger in some cases. A report by Pro Bono Economics shows half of charities are hoping to collaborate more with other charities, while 4% are keen on a merger.

NPC research found that “mergers can result in increased reach, a better user ‘offer’, a stronger voice, and greater sustainability.” That certainly proved true for Bowel & Cancer Research and Bowel Disease Research Foundation, who merged in 2020 to form Bowel Research UK.

People problems – recruitment and redundancies

One inevitable consequence of the increased financial challenges will be job losses. We’ve already seen a significant number of redundancies from the charity sector, disproportionately affecting those in Arts and Culture. But with government support still in place to assist with staff furlough arrangements, the full effect on charity employment is not yet known. 8% of large charities expect to shrink their staff numbers by 25-50% and some predictions suggest that around 60,000 charity jobs may be lost to the Covid-19 crisis in total.

The flipside to this is that staff recruitment is getting tougher, thanks to Brexit. There are around 30,000 EU staff working for UK not-for-profits, many of whom may be unable to remain due to the new immigration criteria, due to the relatively ‘low-skilled’ nature of their roles. This presents a resourcing problem for a lot of charities that are now in higher demand than ever. Meanwhile, those staff who are in work may be cautious about moving in the current uncertain climate. It’s also unclear if the European Voluntary Service will continue, so volunteer numbers could also take a hit.

To deal with this likely staff shortfall, digital transformation could be the answer. PBE reports that over 70% of charities want to increase their digital and remote service delivery, and over half are keen to adopt technology across their back-office processes to drive efficiencies.

The charity sector is needed now more than ever, but their ability to respond is in jeopardy. Innovation in terms of new technologies and different ways of working may be a vital ingredient for the future.