Tracking the changes in our sector

This report provides an overview of the key insights from the first six Waves of the Scottish Third Sector Tracker, from August 2021 to April 2023. Trends relating to key challenges, financial health, service delivery, staffing and volunteering, and emerging needs have been identified, as well as insights into how organisations dealt with the crises that have affected the sector during this period.

The data from the Tracker charts the emergence of the sector from the COVID-19 pandemic through 2021, followed by the development of the cost-of-living crisis and associated organisational concerns during 2022 and 2023. When data collection began in August 2021, the most frequently reported top challenges of organisations related to COVID-19 restrictions, and uncertainty about the future. Since then, the frequency with which organisations have reported financial challenges has increased, and in the most recent data collection, these were the most frequently reported challenges, followed by issues relating to staffing and volunteers.

Despite the emergence of increasing financial concerns, in Wave 6 (Apr 2023) 29% of organisations reported increased turnover in the previous 3 months, an increase from 21% in Wave 5. Further, confidence that organisations will still be operating in 12 months’ time remained high (90%), although it had fallen slightly from a high of 97% in August 2021. Despite these positive indicators, it is concerning that a third of organisations reported having made use of their financial reserves in the 3 months leading into April 2023, an increase compared to the same period in 2022. Almost half of the organisations using their financial reserves felt that this use is unsustainable.

The stark rise in operating costs during 2022 and 2023 was a concern for the Third Sector, with many reporting increases in key areas such as the cost of materials or supplies, staffing and transport. As organisations faced more internal pressures from rising costs, many have had to adapt their services or activities to save money. The most recent data reports that half of the organisations sought additional funding (52%) and just over a third were forced to reduce or cease services (35%).

Issues relating to staffing and volunteers have also increased in prevalence since the Tracker began. In Wave 1, a third of organisations reported this as one of their top challenges, increasing to two thirds by Wave 6. Specifically, in relation to staffing and volunteers, organisations have consistently expressed high levels of concern about volunteer shortages which was most frequently ranked as organisations’ number one challenge. Workforce retention also appears to be a key priority for the third sector, as just under half of organisations in Wave 6 said they faced challenges in this area. The most frequently implemented changes to improve staff retention were increasing salaries to current staff and offering more flexible working options.

While demand for services has continued to rise for most organisations, the most recent round of data collection saw a significant rise in organisations’ ability to deliver their planned programmes and services, having increased from a quarter of organisations in Wave 1 to three quarters by Wave 6. Since tracker data collection began, challenges relating to service delivery have fallen from the most frequently reported (88% of organisations in Wave 1), to the least frequently reported (7.3% of organisations in Wave 6). Organisations faced considerable challenges in adapting their operations in response to COVID-19 restrictions. The Tracker charts a partial move from remote services back to in-person service delivery following the end of the COVID-19 restrictions.

The tracker has also provided insights into the emerging needs of third sector beneficiaries in each round of data collection. Mental health needs and financial needs were the areas of emerging needs most frequently reported by organisations. Through Waves 1-3, emerging needs relating to mental health were the most frequently reported, but this was overtaken by financial needs in Wave 4 and continues to be a priority in the most recent wave of data. Mental health and financial concerns are, however, intrinsically connected, and this was emphasised in respondents' open responses about the impacts of financial challenges on their beneficiaries. The cost-of-living crisis is causing increased stress and anxiety and many organisations have expressed particular concern given many of the individuals and communities they serve already live in challenging circumstances.