As the Government looks to charities and individual generosity to help tackle the challenges of the economic deficit, financial analysis of the UK’s top 500 charities’ suggests a decrease in voluntary income as a result of the economic downturn.

The annual financial data of the UK’s top 500 charities found that there was a 1.1% drop in the major charities’ voluntary income in 2008-2009 as a result of the economic downturn.

Professor Cathy Pharoah, Co-Director of the ESRC Centre for Charitable Giving and Philanthropy at Cass Business School, and author of Charity Market Monitor 2010, analysed the data and overall, the real loss of income from all sources equates to £104 million.

The fall in charities’ resources comes at a time when they face the Government's challenge to support the 'Big Society' through more involvement in local services and communities.

In addition, support for charitable causes from the major philanthropic foundations fell by 7%, as foundations' investment income saw a drop of 13.6%.

Professor Cathy Pharoah said: “This report provides the first hard evidence of how economic downturn took a toll on charity finance. Many charities took steps to reduce the impact of downturn through reviewing their spending and fundraising strategies, and drawing on reserves, and the public clearly continued to prioritise charitable giving.

"Individuals and companies continue to get involved in charitable activities, to donate resources in many different ways, but there was simply less money to go around.

“There is a lot of generosity on which to build, and government has promised to support the Big Society through encouraging charitable giving and.social enterprise.

"The results of this research show how important this will be if charities are to play their part. However, the question of how far charities will be able to respond to increasing needs remains unanswered’.

Charity Market Monitor 2010 also revealed the following results:

• The value of legacy income has fallen by 3.9%, affecting half of the charitable causes amongst the top fundraising charities including social welfare, hospices, the blind, children and disability. Hospices, which depend heavily on voluntary donations, saw a fall of 5.2% in fundraised income.

• The major charities earned £5.9 billion in donations and legacies in 2008/09. The success of appeals such as DEC's Haiti Earthquake Appeal which raised £94 million in just a few months, shows how donors continue to respond to charity need, but economic constraint led to an overall 3.3% drop in the value of donated income.

• Donations to health and services benevolent causes continued to rise, but as government savings target particularly disability benefits, special needs causes including disability saw a fall of 8.2%, with falls in the value of legacy income to charities including Leonard

Cheshire Disability and Scope, and a fall in the value of donations and legacies to the Royal Star & Garter Homes.

• Income from events fundraising was the main success story, particularly through initiatives such as the popular Cancer Research UK's 'Race for Life' which raised an additional £4 million on the previous year’s total.

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