When the organisers of the London marathon decided to postpone the 2020 race from April to October, the decision doubtless came as a blow to the 40,000 or so runners planning to take part. More urgently, it left charities at risk of hitting a financial wall: the 2019 marathon raised a record £66.4 million.

Unfortunately this amount is very much the tip of the iceberg of the impact coronavirus could have on the voluntary sector’s finances. Sector umbrella bodies suggest the crisis is a perfect storm that will lead to a total loss in charity income of £4.3 billion over a 12-week period. There are fears that many vital organisations could go under if assistance is not provided.

The UK’s charity sector is historically enduring – dating back nine centuries at least. The 167,000 charitable organisations pack a financial punch, with a GDP equivalent to a small nation state. They make a vital, if often unsung, contribution to life even in normal times.

The effects of coronavirus on the charity sector will be most obvious in three closely related areas: demand, workforce and financial viability.

Demand for services

One of the first surveys conducted among charities on the impact of coronavirus suggested that 43% expected demand for their services to rise. Homeless charities have had to close shelters due to the cramped conditions. Yet they are expected to play a vital role in achieving the government’s aim of taking homeless people off the streets, and in supporting them in temporary accommodation such as hotels.

The threat to employment and questions over sick pay have prompted unprecedented traffic to the Citizens Advice website, a trend likely to continue as more than 900,000 signed up for universal credit in the last two weeks of March.

Demand, or more precisely need, can be hidden, too. The charity Refuge, which runs the National Domestic Abuse helpline, said there had been a 25% increase in calls and online requests for help since the lockdown began in the UK. Women’s Aid said that the crisis could not have come at a worse time after “years of debilitating cuts”.

Staff and volunteers

The ability of charities to respond to this demand will be affected by the most obvious HR risk in a pandemic: that staff will get sick or have to self-isolate following government guidance. The government’s assessment of likely sickness levels seems to have been around 20%, at least before the lockdown on March 23. This implies that at any time 175,000 charity employees might be unable to work, although those with milder symptoms may be able to work from home.

Volunteers, a crucial part of the sector, will be affected, too. While clichés about “old ladies making tea” are far from the truth, those aged 65-74 are more likely to volunteer than any other age group. They could be more seriously affected by the virus, and also more likely to be self-isolating.

Funding

Over £8 billion per year is donated by the UK public to charities each year. While around a quarter of people give via the relatively secure route of direct debit, the lockdown will have a much greater effect on ad hoc cash donations, which remain a popular form of giving.

The same is true for public events. Sponsorship income traditionally rises in line with the better weather, with April to October the peak months, making the timing of the UK’s lockdown even more damaging. Meanwhile, legacy income – funds from people’s bequests – is predicted to fall by around 9% from its current level of £3.1 billion, having previously been steadily rising. The likelihood of falling house prices and the reality of plummeting share values are major factors. Share devaluation also has a negative effect on charities’ own investment income, as it did in 2008.

Funding from statutory bodies and funding agencies should in theory be more robust. Many funders have relaxed reporting deadlines and other requirements, while government advice is for local authorities to pay those who deliver public sector contracts until at least June. But additional earned income, from charity shops, will dry up almost completely in this period.

Government measures, such as the Coronavirus Job Retention Scheme for paying furloughed staff, may help. So will existing reserves – charities usually set aside between three and six months’ worth of costs – or initiatives from philanthropists such as Martin Lewis. Funders such as the Big Lottery have made dedicated funding available and the National Emergencies Trust appeal on coronavirus raised £16 million in its first two weeks.

Calls for more help

Nevertheless, without additional action from government, many in the sector claim they will be prevented from helping the response, or even go out of business altogether. Small charities make up the majority of the sector: 96% turn over under £1 million per year and these little platoons of predominantly local organisations face an uncertain future. But even a household name such as Oxfam is already taking drastic measures to preserve funds, furloughing two-thirds of its UK staff.

By early April, no specific support package for charities had been announced by the Treasury. The #EveryDayCounts campaign, supported by a coalition of infrastructure bodies and individual charities, is pressuring government to step in immediately. It is seeking a cash offer to keep charities going, and a tweak to regulations which would allow staff on furlough to volunteer for their charity in a time of need.

A sector which was once told by a minister to “stick to its knitting and keep out of politics” now finds itself campaigning hard for a political solution to its existential crisis. Whether dealing with coronavirus proves itself to be a marathon or a sprint, millions depend on the outcome.

This article is republished from The Conversation under a Creative Commons license. It's written by Andrew Brady, Senior Lecturer in Leadership and Management, Anglia Ruskin University. You can read the original article here.

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