The cost-of-living crisis is a significant issue affecting millions of people in the UK. With rising inflation and soaring costs, many households are struggling to make ends meet, let alone make charitable donations. However, charitable giving remains a vital source of support for vulnerable individuals and communities across the country, making it essential to understand the impact of the cost-of-living crisis on donations.
What is the cost-of-living crisis?
The UK has been experiencing a cost-of-living crisis since late 2021, which means that ‘real’ disposable incomes have fallen. Essentially, households can expect to see their incomes rise at a slower pace than prices over the next two years.
The causes of these price increases are multifactorial. Coming off the back of the Covid-19 pandemic, there was global disruption to supply chains and manufacturing, paired with a post-lockdown surge in spending as restrictions were lifted. This equated to a lack of supply and a rise in demand – i.e. increased prices. To worsen the situation, the beginning of 2022 saw the Russian invasion of Ukraine, resulting in inflated energy prices as sanctions put a halt on the supply of Russian energy sources.
With these increased prices, inflation has reached a 40-year high, at 10.7%. The Bank of England adjusts interest rates to try and keep inflation within their target of 1-3%. However, inflation is expected to remain high for the next two years, and their target of 2% is only projected to be achieved by mid-2024.
So, with inflation rates so high, nominal wages have been unable to keep pace, resulting in a fall in ‘real’ income. But what does this mean for charitable donations?
This article will investigate the effects of the current cost-of-living crisis on charitable donations and how charities are coping with the current economic climate.
Are people still making donations?
According to the CAF UK Giving Report 2022, it was observed that the charity donations in 2021 were consistently lower each month than the corresponding months in 2019, indicating an established negative trend. Despite some improvement before the close of 2021, with 33% of people donating in November and 36% in December, the numbers were still lower than the equivalent levels for the same period before the pandemic. The initial months of 2022 fell further, with January at 29% and February down to 25%.
However, March 2022 saw a rise in donations to 34%, believed to be in response the Russian invasion of Ukraine. The negative trend re-established in April, with 4% of people stating that they had cancelled their regular donations to charity in response to the rising cost of living, while 8% decided against making a one-time donation, and 6% reviewed the amount they usually give to charity. Between February and April 2022, respondents were asked if they were considering reducing any activities in the next six months to manage their expenses. 62% stated that they would cut back on at least one activity, whereas only 24% said they wouldn’t cut back on anything.
These predictions appeared to impact charitable donations, as moving into Autumn 2022, monthly donations fell to the levels seen at the start of the year. Average donations fell from £67 in August to £51 in September. Additionally, only 26% of people had donated to charity in August; a decline from 30% before the pandemic.
The Enthuse Donor Pulse Winter Edition 2022 revealed that charity donations remained consistent during the three-month periods of Autumn and Winter 2022, with 75% of respondents contributing during each period. However, the level of donations varied depending on the income levels of the participants, with 63% of those earning £20,000 or less donating compared to 83% of those earning over £40,000, suggesting that those who are more greatly affected by the crisis, may be less likely to donate. Additionally, in Winter 2022, 60% of respondents said that they are finding it harder to donate because of their current financial situation.
How are charities coping?
According to the Charity Resilience Index survey conducted between October 2022 and January 2023, it is clear that the rising cost of living is having a severe impact on the charity sector.
More than half of the charities surveyed reported that they were worried about struggling to survive, with the percentage increasing from 51% in October to 60% in December, before dropping back to 53% in January.
The impact of the cost-of-living crisis is also affecting the communities served by charities. Four fifths of the charities surveyed agreed that the people in their communities are likely to be severely impacted by the crisis. Furthermore, the demand for charitable services has remained high, with 57% of charities reporting an increase in demand in January, down slightly from a high of 63% in November. While a quarter of charities reported that demand has remained the same, very few charities reported that demand has decreased since the previous year.
However, the report also showed some signs of positivity. In January, 66% of charities felt confident to face the current challenges, which was an increase from the low of 56% recorded in November. This is a positive sentiment that charities may be finding ways to adapt and overcome the challenges posed by the cost-of-living crisis. Around two-fifths of charities disagreed or strongly disagreed with the statement ‘we have made cuts to services and there is no room to cut further’, indicating that these charities are committed to maintaining the quality of services they provide, even in the face of financial strain. However, it is important to note that around a quarter of charities surveyed since October 2022 strongly agreed or agreed that there is no room for further cuts.
This slightly positive sentiment was also reported in the Enthuse Charity Pulse 2023 report. It reported that 29% of charities experienced a decrease in income in 2022 compared to the previous year. However, 30% of charities reported that their fundraising income increased, and 34% said it remained stable. Overall, this is somewhat positive, as a total 64% of charities either maintained or increased their fundraising income in 2022, which was slightly higher than the previous year.
It is clear that the current financial landscape is having a negative impact on people’s ability to donate to charity. With donation levels dropping compared to pre-pandemic levels, it is clear that many households are struggling to find the funds to donate to the causes they care about. This was also reflected in the opinions of the charities themselves, with many worried about their ability to survive, and expressing concern about the communities they serve.
However, there are also some threads of positive sentiment that appear to be revealing themselves. Two thirds of charities are confident to face the current challenges, and many are combating the lack of donations by making the necessary cuts in services where needed.
Also, two thirds of charities reported that their income levels had increased or maintained in 2022.
This positivity has also been bolstered recently with the 2023 Spring budget, which has seen £100 million pledged to frontline charities and community groups due to the increased demand from vulnerable groups. Around a quarter of this will be allocated towards funding measures that increase the energy efficiency and sustainability of support organisations, with the intention of reducing their future operating costs.