Charities are operating on their narrowest financial margin in five years, despite mounting financial challenges, data from the Charity Commission has shown.

New data from the Charity Commission reveals that expenditure growth (9.6%) continues to outpace income growth (6.8%) but leaving a more marginal gap of just £0.7bn, down from £2.9bn.

The regulator’s analysis, based on annual returns from charities for the financial year ending 2023, raises concerns about financial resilience, with 42.6% of charities reporting expenditure exceeding income.

However, this margin is continuing to narrow and the sector achieved a record £95.73bn in spending on charitable purposes in 2023 – up 9.6% from the previous year.

This record-breaking expenditure took place during a period of acute cost-of-living pressures and growing demand for charity services, with 9% of people reporting they had received food, medical or financial support from charities – up from 3% five years ago.

The surge in activity was made possible by strong public generosity, with donations and legacies contributing £31.4bn, accounting for nearly a third (32.6%) of all charity income.

Corporate giving also played a significant role, with nearly half (49.7%) of charities earning £100,000 or more reporting contributions from business donors.

Volunteers remain the backbone of the sector, outnumbering paid staff by more than three to one, with seven in ten charities supported by volunteers and five in ten employing paid workers – the vast majority (98%) of whom are based in the UK.

“Our analysis shows the sector is not just delivering life-changing impact across communities but that it is an economic powerhouse, spending almost £96 billion a year on delivering charitable purposes," Charity Commission CEO, David Holdsworth said.

“While the cost-of-living crisis has applied significant pressure on charity finances, it also shows charities rising to the challenge, spending almost ten per cent more in 2023 than in 2022 to meet increased need.”

---