Charities have lost faith in the Keir Starmer led administration to improve their sector amid concerns around welfare cuts and National Insurance contributions hikes, a survey has found.

Carried out among charity clients of accountancy organisation Kreston Global, the survey found that just over four in five believe the Labour government will negatively impact the sector.

This comes in contrast to last year’s survey ahead of Labour’s victory in the July 2024 General Election which found that three in five believe Labour would have a positive impact on charities.

In 2025 less than one in five believe Labour’s impact on charities will be positive

Mike bath, a partner at James Cowper Kreston says that compared to Labour’s 13-year administration from 1997 “engagement with the charitable sector has been very low on this Government’s agenda - certainly in regard to the role that charities can play in being frontline service providers in place of either local or central government”.

This is despite Keir Starmer’s party putting in place a charity covenant, which pledges to involve the sector more in decision making.

Rising costs, most notably through increased National Insurance employer contributions, and cuts to the welfare budget, are also having an impact on charity sentiment towards Labour, Bath added.

“Proposed cutbacks to disability benefits are likely to create additional service user demands, at the same time that charities are absorbing increases in the National Minimum Wage and Employer National Insurance,” he said.

“Labour administrations have traditionally had ‘social’ spending as a high priority which has historically benefitted the sector. This administration’s priorities - for the moment - appear quite different.”

Financial pressures

Kreston’s survey also found that four in five charities are “experiencing pressures on their income streams” and three in five are look at ways to diversify their income.

More than nine in ten have seen wages increase over the last year, while three in five have seen energy price hikes and seven in ten say their insurance payments have risen.

Recruitment and retention is cited as a problem among almost half of charities. Increasing salaries is the most common route to attracting and keeping staff. Recruiting skilled trustees is also problematic, with legal, IT and human resources skills the most likely to be absent from boards.

Almost half say that in 2025 they are not focusing on environmental, social or governance issues. Most say that reduced funding is “the biggest emerging risk in 2025”.

However, almost nine in ten believe they have the capacity to deliver “the required services” during the year.

Kreston’s survey also found that almost four in five charities believe they are “keeping up with digital changes” and only one in six experienced a cyber-attack, with a similar proportion believing they have sufficient cyber security systems in place to halt an attacks.

Its report adds: “Looking to the future, time will tell if charities have done enough to prepare for the increased costs brought in by new Government rules and regulations, and whether these changes will negatively affect the service offered by charities.

“In the meantime, the sector must continue working to increase its resilience whilst providing vital services to some of the most vulnerable people in our society.”

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