New insights from sector data suggest that charities have been able to direct additional resources to delivering their aims, amidst a tightening financial squeeze.
The Charity Commission, the regulator of charities in England and Wales, has analysed data drawn from annual returns for the financial year ending 2023 - the most comprehensive dataset available to the charity sector.
Collectively charities that submitted annual returns spent £95.73 billion delivering their charitable aims in 2023, 9.6% more than in 2022, reflecting a further broadening and deepening of the vital societal impact of charities. This was during a period when cost of living pressures were being felt acutely within society.
This impact is underpinned by the generosity of the public, with donations and legacies reaching £31.4bn - almost a third (32.6%) of all charity income. Small charities, which are by far the greatest in number, largely rely on this income.
Businesses also made a considerable contribution to charity with almost half (49.7%) of charities with an income of £100k or more reporting donations from a corporate donor.
The data underlines that volunteers are essential to delivering public good, outnumbering paid workers by a factor of more than 3:1. Around 7 in 10 charities reported they were supported by volunteers in 2023, while 5 in 10 had paid workers (permanent or fixed-term employees and self-employed). The majority of paid workers (98%) were deployed in the UK.
However, for a second year in a row, the analysis drew out some indicators underlining concerns about financial resilience in parts of the sector.
Overall growth in expenditure (9.6%) outpaced growth in income (6.8%) leaving the gap between the two at its narrowest in five years at £0.7bn, down from £2.9bn in 2022.
While more than half of charities (55.1%) have more income than expenditure, around 2 in 5 charities (42.6%) had expenditure that exceeded income. This situation leaves many charities with little or no headroom for investing in longer term or more innovative projects, and depending on reserve levels, a continuation of this trend may mean some charities cease to operate altogether.
The data follows the Commission's release of separate data earlier this week pointing to increased demand for charities' services, with 9% of people indicating they had received food, medical or financial support from charities, compared to just 3% five years ago.
Charity Commission Chief Executive, David Holdsworth, said:
Our analysis of charities' annual returns for 2023 shows the sector is not just delivering life-changing impact across communities but that it is an economic powerhouse for the economy, spending almost £96 billion a year on delivering charitable purposes.
Charities' work with those from some of our most marginalised and disadvantaged communities unlocks potential, enabling more people to play an active role in society, helping people up, not handing out. This vital work is happening right across England and Wales, often in places and with people the state cannot easily reach.
While our data shows the cost of living crisis has applied significant pressure on charity finances - with the narrowest gap between income and expenditure in recent years - it also shows charities rising to the challenge, spending almost ten per cent more in 2023 than in 2022 to meet increased need.
Each question asked of charities in the annual return is designed to enable the Commission to identify risks and trends in the sector; to help the public make informed and confident choices about charities; and to allow policy-makers, researchers, sector groups and the public to gain a richer understanding of the charity sector in England and Wales.
