Charities are at greater risk amid the coronavirus pandemic than 'currently understood' because they subside public sector contracts, research has revealed.

Research conducted by think tank NPC revealed the majority of charities with public sector contracts (54%) cross-subsidise those contracts with funding from other sources, such as the public and fundraising events.

Over half of those surveyed (59%) said they cross-subsidise their public sector contract with other sources of income, which poses risks to delivery as fundraising, trading and investment income all fall over the coming weeks, NPC said.

The findings follow figures released by the NCVO and other sector leaders, which revealed over £4.3bn could be wiped from the sector over the next 12 weeks as the coronavirus pandemic escalates.

"This may mean charities are unable to deliver them, vital services fail, or government funding is placed under more pressure as it has to find a short notice new provider," the think tank said.

The organisation released the figures ahead of the State of the Sector 2020 report, in a bid to help funders and charities understand the underlying issues in the charity sector, and to shape how government and funders target their support to charities.

Other key findings from the report show leaders have been doing more in almost every area than they were in 2017, which may have led to limited resources when the crisis hit.

It said 83% of charities were delivering services or products in 2017, compared to 89% in 2019/20.

Meanwhile charities' confidence in their ability to use digital technology has dropped since 2017, from 70% down to 59%.

"This may leave them struggling to shift services online to reach isolated people during quarantine and social isolation," NPC said.

The research also revealed less than half (47%) of charities believed independent funders offered the 'flexible core funding', which could be vital to keeping them afloat in the crisis.

“Charities are mobilising to help thousands of people across the country but they are also crying out for more help and support. Their income is collapsing just as people’s need to use them starts to grow," NPC CEO Dan Corry said.

"Our research reveals some underlying problems in the sector, which the crisis will undoubtedly exacerbate.

"The response both from policymakers and the sector to the crisis needs to take this pre-existing weaknesses into account, and make sure issues like the lack of core funding, the weaknesses on using digital technology and the cross subsidy of contracts are not overlooked, or we could see charities fail and thousands of vulnerable people put at risk.”

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