Third sector forecast for 2017

Key Findings

• The majority of charities remain relatively confident about their future, but recognise that 2017 will be challenging.
• There is a ‘squeezed middle’ of medium-sized charities that are particularly worried about the dual pressures of financial uncertainty and increasing demand.

Over the last year

• Over half of responding charities stayed the same size, while nearly a third grew, and only 13% decreased in size.
• Over the last year 47% of respondents reported having had a good year, and 37% said their year had been ‘ok’.
• However, nearly a quarter of medium sized organisations have had a ‘difficult year’.

Financial uncertainty

• Respondents are worried about the financial situation for the sector with the majority (76%) thinking that things would worsen. Only three respondents (less than 1%) thought that the sector’s financial situation would improve in 2017.
• This year, respondents were also very concerned about government funding and the wider economy – 87% of respondents think the financial situation of local government will worsen; 74% think the finances of national government will worsen; and 69% believe the wider economic situation will worsen.
• Three-quarters of respondents said that their current funding situation means that they cannot confidently plan ahead for more than a year at a time. For smaller and medium-sized charities this figure rises to over 80%.

Given the financial pressures on the public purse, respondents felt that replacing uncertain short-term finding with long-term funding and making procurement more straight forward would make a huge difference to their ability to deliver and plan services and better cope with tightening funding.  Long-term funding would give service users more stability, and would let organisations focus on service delivery and not be constantly climbing on and off the “funding roundabout”.

Increasing demand

• 72% of charities are expecting demand to increase. For the sector’s larger charities, this figure rises to over 80%.

The need to ‘do more with less’ has been a defining feature for the sector in recent years, and will only intensify. Many spoke of their lack of capacity to meet further increases in demand.

Planning for the future

• Respondents are planning to develop new projects (70%), recruit new volunteers (61%) and board members (55%), and identify new income sources (60%).

Many in the sector are planning positive moves in the future, and are continuing to be innovative and resilient. However, there has been a noticeable drop in the numbers planning these positive steps, with less focus this year on developing new services or extending existing services, building capacity, developing business plans or new income sources. The picture is of a sector that is surviving, but not thriving. The sector is keeping its head above water, but many now feel unable to take risks or invest in new activities and strengthen sustainability, and some report cutting back services.

Competition and collaboration

• 74% of respondents expect competition for resources to increase.
• A positive aspect to this finding is that 59% think this will lead to more collaborations.

Respondents expect to see competition for dwindling pots of funding to increase. It is crucial that funding streams encourage collaboration, and do not set organisations against one another in competition, or (as some respondents worried) a fight to the bottom that prioritises short-term savings over longer term aims and sustainability.

Sector remains confident for the most part

• 3 in 4 respondents are confident or very confident in their organisation’s future.
• However 1 in 4 respondents rated their confidence in their organisation’s future as low or very low. And for charities in the ‘squeezed middle’, the number who are concerned about their future rises to 1 in 3 respondents.

Despite the many pressures facing the third sector, respondents remain upbeat about their ability to meet future challenges. However, charities in the middle income brackets (£25K-£100k and £100k-£1m) show the lowest confidence levels.

Importance of public support

• Charities are concerned about the need to maintain public trust.

Many respondents highlighted that - more than ever - they the general public to offer support through donations, volunteering, fundraising and similar activities.  As well as concerns about economic uncertainty impacting on the public’s ability to donate, they are worried about the effects of negative stories in the media, and the resulting poor perception this can cause. On the other hand, increasing numbers are harnessing digital opportunities to spread their positive messages and gain new supporters through social media.

Previous year's findings

In last year’s survey with the general public we found that

• 82% of the general public agree that charities are trustworthy and act in the public interest. This is significantly higher than the 57% reported in the 2015 Charities Aid Foundation survey and shows that trust in charities remains high in Scotland.
• 84% of households in Scotland used a charity last year, while 76% took part in an activity provided by a third sector organisation.
• 9 out of 10 (89%) respondents have personally supported a charity in some way in the last year, donating money or goods, or giving their time as volunteers and supporters. This compares to 81% for the wider UK overall.
• 77% of respondents donated money in the last year. Donating money remains the most popular way the Scottish public supports charities, highlighting the importance of fundraising to Scottish charities.
• However, over a quarter of those surveyed said they had lost trust in charities in the last year. More than 1 in 4 people surveyed reported losing trust in charities over the last year, and 41% said that negative media stories had affected their trust.

Notes:

1. The Sector Forecast findings are based on responses from 404 SCVO member organisations. The survey was carried out in Nov-Dec 2016.
2. The Public Trust findings are based on a telephone survey of 1,028 respondents (adults aged 16+) commissioned by SCVO and conducted by Ipsos Mori.  Fieldwork was carried out 9^th-16^th November 2015.