The charity sector in the UK continues to face what NCVO describe as unpredictable and challenging times labelling 2025 the year of the big squeeze, with many organisations facing the perfect storm created by funding falling, costs increasing, and demand climbing.
There were 170,056 charities registered charities in the UK on the Charity Commission’s register, as of March 2024, plus an additional 80,000 and 100,000 unregistered charities across England and Wales. Charity Commission data show that 1,281,583 people were employed by a charity in England and Wales in January 2025. Rising costs and demand for services and dwindling donor numbers led to many of these important not-for-profits closing their doors in 2024. SAWN (Social Action West Northamptonshire) are beginning to see these cumulative pressures impacting on our own sector in West Northamptonshire, with more requests to find funding, or avert potential insolvency.
Inflation, the cost-of-living crisis, and the UK government’s decision to raise employer National Insurance Contributions (NIC) have placed huge strains on the charity sector. NCVO estimates the NIC increase represents an additional financial strain on the sector to the tune of £1.4 billion. The government’s decision to reduce UK spending on international development from 0.5% of GDP to 0.3% has also raised major questions for many UK charities reliant on public funding. In October 2024, however, the government announced the creation of a Civil Society Covenant to begin the partnership between government and Civil Society, outlined in Labour’s election manifesto. The new Covenant is designed to harness the knowledge and expertise of those working in the charity and social venture sector, with the government committing to delivering a decade of national renewal that will only be possible with a vibrant, thriving civil society.
Charities are struggling to meet the growing demand for their services, and many are concerned about their ability to continue providing support. In October 2024, the Civil Society Group sent an open letter to the Government calling for it to encourage philanthropy, reinstate mandatory reporting of charitable giving by companies, increase charity tax limits, consult on the introduction of VAT relief on charitable donations and donated goods, extend charitable tax reliefs to wholly-owned charity trading subsidiaries, confirm there will be funding for HMRC to continue its review of Gift Aid, and provide greater clarity on the matter of charitable business rates relief for private schools. According to the Charity Excellence Framework, meanwhile, AI offers charities opportunities to increase impact, reduce workload and improve fundraising effectiveness, with sector bodies needing to act collaboratively, quickly, and well to enable us all to exploit the opportunities and adequately mitigate the risks. The charity True Ambassadors highlights, for example, that advanced digital tools such as AI-driven fundraising platforms will enable organisation to personalise donation requests based on donor behaviour and preferences.
SAWN states:
We see all these trends and patterns bubbling under across Northamptonshire. Whilst it is true to say that in many instances the VCFSE sector needs to understand and harness change, its also easier said than done. Many smaller charities lack the capacity and resource to partner well, lead strategically, and ride a perfect storm. However, we also believe that if the VCSFE were to be lost (which could be a real probability in future years) communities will be the poorer and more individuals will simply become vulnerable. The adage that you don’t know what you had until its gone should be a principal plank by which statutory partners support the sector, deliver a new way of working and use the VCFSE as a key broker. Taking the simple example of the latest 10-year NHS Plan, who better as partners to achieve the key objectives – Hospital to Community, Sickness to Prevention and Analogue to Digital. The VCFSE sector has front facing links to communities that statutory partners could only dream about. The driver here is better commissioning, quality co-production and community social action, and so SAWN welcomes the pragmatic discussion with all those who will listen: And we don’t argue from a Unicorn and Rainbow perspective of the world. We know resources are tight across the landscape, but our sector could be a sensible solution for many.