From charity closures to the government’s new covenant; 2025 has been a busy
news year for charities
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The UK charity sector has faced another year of intense pressure, with rising costs, funding shortfalls, and growing demand for services pushing many organisations to breaking point. From job losses and closures to industrial action and funding freezes, 2025 has tested the resilience of charities across the country.

Yet amid the challenges, the sector has also shown innovation, adaptability, and a renewed commitment to collaboration. This year’s roundup explores the key themes that shaped the sector, from financial strain and volunteer shortages to the rise of AI and a new government covenant promising a fresh start.

Costs, cuts and closures

There’s no hiding from the news in 2025, and its ever-growing focus on the relentless financial squeeze, rising costs, falling income, and increasing demand. The results are forcing many organisations to restructure, downsize or close altogether.

A survey by Cadent and Thinks Insight & Strategy found that more than half of charities fear they may not be operating in five years. Over 40% are making redundancies or pausing recruitment, and three in five say heating is now a “luxury” for some organisations.

Another survey by Big Give, Global’s Make Some Noise, and NCVO found that nearly half of small charities (under £1m income) are at risk of closure within a year. One in ten have less than six months’ funding left. “We risk being frozen out of funding,” said Alix Lewer, CEO of The Include Project. “Finding funding is mission-critical.”

This is part of a wider theme happening across the sector. Save the Children UK announced plans to cut nearly 200 jobs in a bid to save £6 million from its £44 million wage bill. CEO Moazzam Malik said the move would “shift scarce resources from HQ activities to address challenges on the ground,” as the charity refocuses on UK-based work and a sharper international strategy. Staffing costs had surged by £7 million over four years, outpacing income growth.

In a similar vein, Scouts also implemented redundancies, citing “extra cost pressures on essential work” and a rise in legal claims. Chief executive at the time, Matt Hyde revealed that 59% of the charity’s budget was spent on staffing, prompting a review of vacant roles and programme delivery. Around 20 sta were made redundant.

Meanwhile, Bond cut staff and vacated its London office to reduce overheads, and the Samaritans is also reviewing its 200-branch structure, with CEO Julie Bentley warning that
the current model “is not sustainable and hinders us providing the bestpossible service to people who need us.” The charity’s income fell short of its £25.9 million expenditure in 2024, and government contract income dropped by over 75% in two years.

This is all happening amongst the backdrop of many small charity closures. In 2025, the news pages were peppered with the names of charities that have closed or warned of imminent shutdowns. Hypo Hounds launched an urgent appeal to raise £150,000 to continue operations, and Gillingham Street Angels announced its closure due to “imprudent financial and operational decisions.”

Meanwhile, Challenge Wales, a sailing charity that supported 5,000 young people over 16 years, also closed, citing “mounting financial pressures.” Its vessel will transfer to the Tall Ships Youth Trust to preserve its legacy. And Torbay Coast and Countryside Trust, which managed 1,700 acres of land and employed 86 staff, entered liquidation after years
of deficits. “The gap between our generated income and what it costs to care for these places has grown to the point where we can no longer
continue,” the charity said.

Compounding pressures

The tumultuous landscape has also led to more industrial action as staff push back against below-inflation pay offers and other compounding pressures. At the National Coal Mining Museum, more than 40 staff went on strike for nearly a month after rejecting a proposed 80p per hour pay rise.

Similarly, at the Scottish SPCA, 140 members of Unite were balloted for strike action after rejecting a two-year pay deal offering just 1.6% in 2025 and a one-off 2% payment in 2026, well below the July 2025 inflation rate of 3.8%.

The Howden Rewarding Industries 2025 report found that the rise in employer National Insurance Contributions from 13.8% to 15% is now the single biggest challenge facing charities. Over half of charities surveyed said they were at risk of closure in 2025, up from 43% in 2023.

“Charities are already stretched thin by rising costs and falling donations,” said Mark Fisher, associate director at Howden. “Now, they’re being asked to
absorb a tax increase they simply can’t afford.”

Meanwhile, research by the Living Wage Foundation revealed that one in eight charity jobs are paid below the real Living Wage—up from one in ten last year. That’s 286,000 low-paid roles, with the Northeast worst affected.

“Staff from working-class backgrounds continue to be underrepresented in the charity sector,” said executive director Katherine Chapman.

All of these factors are made worse as several major funders paused or closed their grant programmes in 2025 due to overwhelming demand. The Peter Harrison Foundation halted new applications after its success rate dropped below 5%. The City Bridge Foundation also paused funding to review its strategy.

Further to this, The Barratt Foundation closed its £300,000 grant programme after 45% of applicants failed to meet the criteria. Only 27 charities were funded, just 7% of total applicants.

The Leeds Community Foundation, which has invested £70m in good causes over 20 years, warned of a “deepening crisis.” In 2025, it could only fund 30% of applicants, down from 40% in 2023. “Too many are now facing closure because the funding simply isn’t there,” said CEO Steph Taylor.

Despite the challenges, some funders are adapting. The Henry Smith Foundation pledged to offer more flexible, long-term grants and involve communities in funding decisions. In 2024, it distributed nearly £62m to over 970 organisations.

And research by UKGrantmaking found that trusts and foundations have overtaken government as the largest source of grant income, with a 12% increase in giving to £82bn. However, just 4.5% of this went to social justice causes, and only 0.2% supported community organising.

Volunteer crisis deepens

Volunteers have long been the backbone of the charity sector, but 2025 has seen a deepening crisis in recruitment and retention. Despite a strong public appetite for volunteering, many organisations are struggling to convert interest into action.

Research by the Royal Voluntary Service (RVS) found that 140 million workplace volunteering hours went unused in 2024, despite two-thirds of businesses offering volunteering days. That’s a missed economic value of £32.5bn.

The RVS launched GoVo, a digital platform funded by the People’s Postcode Lottery, to match volunteers with flexible roles. “Volunteer recruitment and retention is becoming increasingly difficult,” said CEO Catherine Johnstone. “There’s a keen desire to volunteer—we just need to remove barriers.”

Research by Access Assemble found that while online searches for volunteer roles increased by 13%, many people were deterred by lengthy application processes and a lack of flexible roles. Cities like Oxford, Swindon, and Hull saw the biggest spikes in interest, but this didn’t always translate into signups.

A report titled What If Everyone Stops Volunteering also warned that the UK would “descend into a dystopian state” without volunteers. “Volunteering is not a ‘nice to have’—it is part of the backbone of policing in London,” said Rebecca Pritchard, head of volunteering at the Metropolitan Police.

AI adoption accelerates

Perhaps on the brighter side, AI use in the charity sector has surged. According to Blackbaud, 77% of charities now use AI tools, up from 57% last year. However, only 16% have a formal AI policy, and 70% of small charities remain without one.

To address this gap, Zoe Amar Digital launched the Charity AI Leadership Essentials video series, offering practical guidance on AI strategy, governance, and change management. The initiative follows the success of the Charity AI Leadership Accelerator, developed in partnership with Microsoft.

Meanwhile, the newly formed Charity AI Taskforce, convened by CAST and Zoe Amar Digital, is urging the government to engage with the sector on AI policy. The taskforce argues that charities must be included in national
AI strategies to ensure equitable and
ethical adoption.

The taskforce also highlighted the potential for AI to enhance volunteer engagement, streamline operations, and improve service delivery. However, it warned that without proper
support, smaller charities risk being left behind.

“Artificial intelligence is no longer a topic of the future—it is the defining strategic question of our time,” said David Knott, CEO of the National Lottery Community Fund. “We must
ensure AI works for communities, not just the few.”

A new covenant, a new chapter?

One of the biggest stories of the year was the launch of the Civil Society Covenant. In July, prime minister Keir Starmer launched the Civil Society Covenant, promising a reset in the relationship between government and charities. “We’re not going to shut charities out and then expect you to pick up the bits,” he said.

The covenant pledges to respect the independence of civil society, ensure fair remuneration for service delivery, and uphold the right to campaign. A Joint Civil Society Covenant Council has been established to oversee implementation.

While the covenant has been welcomed, sector leaders remain cautiously optimistic. Jane Ide, CEO of ACEVO, called it a “valuable foundation” but stressed the need for continued scrutiny. Caron Bradshaw of the Charity Finance Group echoed this, urging the government to match words with action.

Lisa Nandy, secretary of state for Culture, Media and Sport, said: “We believe those voices need to be heard; that those organisations don’t just have a right, but a duty to speak out.”

Looking ahead
As 2025 draws to a close, the charity sector stands at a crossroads. The challenges are immense, rising costs, funding shortfalls, volunteer shortages, and governance pressures, but so too is the sector’s capacity for innovation, collaboration, and resilience.

From embracing AI to reimagining volunteer engagement and holding government to account through the Civil Society Covenant, charities are adapting to a rapidly changing landscape. The coming year will be critical in determining whether these efforts can translate into long-term sustainability and impact

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