Charities are facing ‘significant deterioration’ in their financial health due to the impact of Covid-19 and the ‘enormous financial squeeze’ ahead will be unsustainable for most, a new survey has revealed.

The first Charity Health Check, conducted by ACEVO and researches at the Centre for Mental Health, has shown most charities are facing significant deterioration in their financial health whilst they fight to protect delivery of front-line services.

The health check, which scores the sector’s financial health out of a possible 100, revealed a score of 30.8 in May, showcasing ‘an extremely bad April’ and an ‘enormous financial squeeze ahead’. A score of below 50 showcases deterioration, whilst a score of above 50 marks improvement.

The score of 30.8 came as the majority of respondents reported a fall in reserves, cash-flow, donations and new business income in the last month.

Results were based on 174 charities across England and Wales, which were asked about the changes seen in April across five key markers of financial health, including new business and donation income, cashflow, number of employees, reserves and spending on front line delivery.

Acevo chief executive, Vicky Browning, called for more funding for the sector, saying income has “fallen off the edge of a cliff” while charities are doing “whatever they can” to continue to provide vital services.

“Charities are experiencing a reduction in cashflow and reserves while maintaining or increasing frontline services. This is not sustainable long-term and demonstrates why further government support is urgently needed if we are to build back better,” she said.

Centre for Mental Health chief economist, Nick O’Shea added that the health check “paints a worrying picture” of the sector’s position and its future prospects.

“A rapid financial response is needed to prevent vital support disappearing from people’s lives when they need it the most.”

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