Charities can expect to see little rise in income from donations or government, with earned income the best prospect for future growth, NCVO has warned.
The latest Civil Society Almanac shows total sector income grew to £45.5bn in 2014/15, the year for which the data is newly available, from £44.3bn the previous year.
The main growth area for charities in recent years has been in earned income, according to NCVO’s analysis. While donations from the public grew only 6 per cent between 2007/08 and 2014/15, from £7.19bn to £7.65bn, earned income from the public grew 35 per cent to £10.45bn. Charities’ earned income includes fees for their services and also income from selling goods or services to raise money.
Income from government increased around 1 per cent overall, to £15.3bn. Income from local government, both in contracts and grants, continued to decline from its 2010 level.
With official projections forecasting no substantial household income growth in the coming years, and NCVO research indicating charity giving is broadly correlated with household income, the national body also forecasts a challenging fundraising environment.
The government has been considering how to allocate a predicted £2bn of money from dormant stocks and shares holdings. NCVO said the money should be used to create endowment funds that would support local charities through the difficult climate and into the future, and to help charities and community groups buy community assets.
NCVO chief executive Sir Stuart Etherington said charities have become more entrepreneurial in recent years, and that will have to continue if the sector is to grow.
Some charities will thrive despite the gloomy outlook, he said, but the picture for small and medium charities in particular looks challenging.
“The next government could boost local charities and community groups for a generation by using the money from dormant assets to endow community foundations with investment that can generate returns to support charities for a generation to come,” Etherington said. “They could also help communities buy assets that are important to them, putting them under the control of local people through charities and community groups.”