Charity sector adds £2.5bn a year to North West economy, study finds

Written by Matt Ritchie

The third sector makes a huge contribution to the North West’s economy, according to a new study, but many organisations in the poorest areas are facing a challenging time.

Think-tank IPPR North and Durham University surveyed more than 1,400 charities in the North West, and found the sector contributes around £2.5bn a year to the region’s economy – equal to around a quarter of Liverpool’s total output.

The figure does not include indirect economic benefits such as helping individuals back into work.

North West third sector organisations last year employed 110,000 people on a full-time or equivalent basis, the study found, accounting for 3 to 4 per cent of total employment in the region.

Two-thirds of voluntary organisations indicated they had experienced income stability over the last two years, while a further 15 per cent had rising levels of income.

However, 30 per cent of third sector organisations based in the poorest areas reported they were in a financially vulnerable position, compared to 14 per cent in the richest areas.

Organisations serving black and ethnic minority communities were most likely to be experiencing financial difficulties, with 33 per cent reporting this.

IPPR North research fellow Jack Hunter said the study shows charities are an “economic powerhouse” in the North West, even excluding the indirect support the sector provides to the wider economy.

“But while overall the sector seems in relatively good shape, what is worrying is a clear link between deprivation and a charity’s overall financial health: those who are arguably doing some of the most important work with the most excluded North West communities appear to be suffering the most as a result of the government’s austerity policies,” Hunter said. “More attention must be paid to poorer parts of our region, where charities and other third sector organisations are most likely to be in a vulnerable financial situation.”

Professor Tony Chapman of St Chad’s College, Durham, said the impact of austerity policies had been uneven, hitting those in the poorest areas hardest.

“Many charities are adapting to survive in this new environment,” Chapman said. “But many others, especially financially vulnerable charities, are being locked into patterns of behaviour which are underpinned by a belief that the next grant that comes in will solve all their problems. Sadly, this is not true – money can be the cause of problems if a charity does not have the skill, belief or people to do the work.”

The study was funded by IPPR North and Garfield Weston Foundation. It forms part of IPPR North’s ‘The Future of Civil Society in the North’ programme. This work runs alongside two other major studies in North East England, funded by Community Foundation Tyne & Wear and Northumberland, and Yorkshire and the Humber funded by Joseph Rowntree Foundation.

Access the report here.

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