Pandemic and cost of living crisis could cost charity sector £8bn over next four years

A think tank has warned that a ‘double wave’ of income losses amid the Covid pandemic coupled with escalating inflation could leave the charity sector £8bn down on previous estimates over the next four years.

Pro Bono Economics says that the cumulative impact of the health crisis and inflation is creating a near £5bn shortfall this year, compared to estimates made in 2019.

Based on projections for the next four years “in cumulative terms that would leave sector income more than £8bn down on the pre-pandemic trajectory” and warned that this figure could continue to grow in subsequent years”.

Around one in four charities saw more than 40% of their income eroded by the pandemic, through shop closures, a dip household income and cancelled fundraising events were cancelled.

As charities look to recover post-pandemic they now face seeing funds hit further by increasing inflation, which rose to 6.2% in the 12 months to February, a 30 year high.

“Consider for instance that a £20 donation in 2021 will be worth just £17.60 in 2024. Similarly, a grant of £100,000 in 2021 would be worth just £88,100 by 2024", warned Pro Bono Economics.

It added: “After two years of navigating the pandemic, charities are facing their own second wave. The severe drop in living standards and squeeze on household finances due in the coming months will have major impacts on the people who rely on charities for a range of services – from basic necessities to support with complex mental health needs.

“At the same time, charitable incomes will be impacted by inflation, by people’s ability to donate and by tighter departmental and local authority spending.”

Pro Bono Economics chief executive Matt Whittaker also warned that the Chancellor’s Spring Statement this week “will hit some of the most vulnerable members of society harder still” despite offering tax cuts.

“Charities will be expecting a tide of demand from the thousands of families set to be plunged into severe financial difficulties,” he said.

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