The Economy =========== **Here are some of the economic and financial factors that could affect your organisation** A combination of factors look set to make this another difficult year for voluntary sector finances: * UK and Scottish economies still feeling the impact of Brexit, Covid, cost-of-living crisis, and ongoing global economic instability * costs remaining high, particularly food and energy  * additional costs being levied on some voluntary organisations * governments at all levels indicating there will be standstill budgets or cuts in public spending, and independent funders being heavily oversubscribed. Having faced financial difficulties for many years, the sector’s ability to weather another hard year is limited, and service or organisational closures are becoming more common. **Inflation** * Inflation is currently running at around 3%. The Bank of England has warned that it could rise later in the year due to surging global energy prices.   * High costs for items including energy, insurance and wages continue to put strain on voluntary sector budgets. The high cost of food impacts on staff and volunteers, resulting in pay pressures for employers.  * Increases in inflation reduce the real terms value of grants and contracts which are generally not adjusted for inflation. * As households are also impacted by these rising costs, and household budgets feel more stretched, challenges in public fundraising and recruiting/retaining volunteers continue. **National budgets** * The fiscal environment at UK and Scottish level has been volatile for a number of years, with emergency reviews, delays in budget timetables, and promises of multi-year spending reviews delayed in both parliaments. * In November 2025 the Autumn Budget took place. The late date of this Budget pushed the Scottish Budget into January 2026, causing uncertainty for local authorities and voluntary organisations due the risk of delays in funding.  * The UK Government’s 2025 Spending Review (announced 11 June 2025) set out multi-year spending outlooks for all UK Government departments from 2026-27 to 2029-30. This includes the Scottish Government’s indicative budget over this period. [The UK Government stated](https://www.gov.uk/government/news/spending-review-billions-to-back-scottish-jobs) that, in line with the Spending Review, Scotland is set to receive £2.9 billion per year in additional funding over the spending review period. Responding, [the Scottish Government](https://www.gov.scot/news/spending-review-presents-challenges/) stated that the uplift to the Scottish Block Grant falls short of the average uplifts for UK Government departments. * In January 2026 the Scottish Government set out its own spending review, publishing multi-year spending plans up to 2028-29 for resource and 2029-30 for capital. Despite setting out a multi-annual spending outlook, no new commitments – beyond the “fairer funding” pilots – were made in relation to reforming voluntary sector funding. * The tight public spending environment is also likely to lead to increased demand for voluntary sector services, as public services tighten eligibility criteria or increase waiting lists. * The timings of national budgets will mean decisions about voluntary sector funding by some public bodies may not be made ahead of 1 April 2026. SCVO is pressing Ministers to ensure that neither the delay in the budget nor the pre-election period get in the way of timely decision-making and communication of funding decisions. **Local authority funding** * At time of writing, it is not yet clear how local authority investment in the voluntary sector will look in 26/27. * In response to the Scottish Budget 2026/27, [COSLA](https://www.cosla.gov.uk/news/2024/cosla-leaders-response-to-scottish-budget) responded that the settlement was insufficient to meet rising demand for Council services. Over the period of the Scottish Government’s Spending Review, the local government settlement looks [“very difficult”](https://fraserofallander.org/budget-day-3-reaction-council-tax-the-spending-review/) which may, in turn, have an impact on the voluntary sector. **Independent funders** * Independent funders are reporting an increase in applications, and many funds are heavily oversubscribed.  * Some funds have closed to new applicants due to this increased demand. * Other funders have tightened their funding criteria, and focused in on particular issues or areas. * Competition for funding from public sector and independent funders is likely to continue to increase. * Combined with the difficulty in public fundraising, and the fact that despite rising costs, grants and contracts are not keeping pace with inflation, this puts a huge strain on voluntary organisations. * Ongoing global economic turbulence risks weakening investment returns on charitable endowments, reducing the resources independent funders can distribute. **Fundraising** * 6 in 10 people in Scotland donated money to charity in 2022. However, [fundraising remains a key challenge for most charities](https://scvo.scot/research/scottish-third-sector-tracker).  * [UK Giving Report 2025](https://www.cafonline.org/insights/research/uk-giving-report) shows a slow decline in the number of people donating money in recent years with many [citing the cost of living crisis](https://www.cafonline.org/docs/default-source/uk-giving-reports/uk_giving_2023.pdf) (CAF 2024). Although this been mitigated by some donors donating larger amounts, only half of people (50%) donated to charity in 2025, down from 58% in 2019 - equivalent to approximately 4 million fewer donors across the whole of the UK. For those who do give, the key factors in choosing which charities to donate to are personal experience, friends and family, and social media. People also respond positively to donors talking about their giving.  * Charity shops remain an important way for people to give and interact with charities, with around 1/3 of people donating goods and around 1/4 buying goods.  **Employment costs**  * Changes to [employers National Insurance contributions](https://scvo.scot/policy/transforming-the-economy/ni-changes?utm_source=scvo&utm_medium=website&utm_campaign=search) have had a significant impact on medium and large voluntary organisations employing staff. Wave 11 of the Third Sector Tracker found that the increase to employer contributions had a moderate-significant impact on 43 per cent of organisations. pushing many into deficit, accelerating the depletion of reserves, and forcing cuts to staffing and services. The rise in ENICs has also contributed to recruitment freezes, redundancies, and an inability to offer competitive pay.  * Increases in the [National Minimum Wage](https://www.gov.uk/government/publications/minimum-wage-rates-for-2025) may lead to increased costs for some voluntary organisations employing staff, though many voluntary sector organisations in Scotland already pay at least the Real Living Wage.  * As living costs continue to rise, many voluntary organisations will want to reflect this in staff salaries. * [The 2025 Scottish Voluntary Sector Workforce Survey](https://scvo.scot/research/reports/2025-scottish-voluntary-sector-workforce-survey) conducted by SCVO, Volunteer Scotland and Charity Leadership Scotland found that low pay is a pressure facing voluntary sector staff – with only two-fifths of staff feeling they are fairly paid.  * [Recruitment and retention of paid staff](https://scvo.scot/research/scottish-third-sector-tracker) are key issues for the sector, with many organisations reporting difficulty in finding applicants with the skills they need for particular posts.  Given that this issue comes at least in part from the inability of voluntary organisations to keep pace with salary levels in other sectors, the economic situation in 26/27 is likely to see this problem remain and possibly get worse over the coming year.  * Voluntary organisations wish to offer Fair Work to their employees, including paying the Real Living Wage. The Scottish Government is committed to Scotland becoming a Fair Work Nation. At time of writing, they are conducting an evaluation of Fair Work First. As part of Fair Work First, from the 1st of July 2023 those applying for public sector grants have been required to pay at least the real Living Wage and provide effective workers’ voice as a minimum standard. Employers are also expected to make progress towards other Fair Work principles. The Scottish Budget made provision for voluntary sector staff in early years and social care to be paid the Real Living Wage, but beyond this, annual uplifts to the real Living Wage rate, and uplifts for other staff are not resourced. For discussion of non-financial issues impacting organisations that employ staff, see the **[Society](/support/shifting-sands/society)** section  **Volunteering costs** * After a consultation, Scottish Government retained the fee waiver for disclosure checks for volunteers.   * The latest [Scottish Third Sector Tracker (Wave 11)](https://scvo.scot/p/103256/2026/02/03/the-scottish-third-sector-tracker-wave-11-autumn-2025) reports that volunteer recruitment and retention challenges remain acute, with 62% of organisations experiencing moderate–significant difficulty. The costs of recruiting and supporting volunteers are seldom recognised by funders or the public. SCVO supports Volunteer Scotland’s calls to change that, and to make sure the [Volunteer Charter](https://www.volunteerscotland.net/volunteer-practice/volunteer-charter#10-key-principles) is embedded in the sector.  **Managing your organisation’s finances**  * Strong financial management is always important, but arguably even more so in the current economic climate.  * Financial pressures remain acute in the voluntary sector. [Wave 11 of the Scottish Third Sector Tracker](https://files.scvo.scot/2026/01/wave-11_final.pdf?_gl=1*td9wu3*_gcl_au*MTY1ODkwMTIzMC4xNzY3NjA5ODk1) found that, when asked to identify their top three challenges, 40 per cent of organisations highlighted difficulty fundraising, 37 per cent cited rising costs and inflation, 32 per cent reported financial or cash‑flow constraints, and 28 per cent identified delays or reductions to funding.  * During 2025, the Scottish Third Sector Tracker showed an increase in the number of organisations using their reserves. In Autumn 2025, six out of ten organisations that had done so said their use of reserves was unsustainable.   * An increasing (although still small) number of voluntary organisations are finding themselves in conversation in their board meetings or with their auditors about whether or not they are a going concern.  * CEIS and other partners have done [work to support organisations in crisis](https://communityenterprise.co.uk/news/emergency-support-for-the-third-sector), but it is important for trustees and senior staff to recognise the red flags before crisis hits. Prompts for planning -------------------- Do you have a strong understanding of your financial commitments for 2026/27, including costs which may rise due to changes in legislation or in line with inflation?  How much of your planned income for 2026/27 is unconfirmed?  What is your contingency plan if decisions on this funding is delayed, or applications for funding are unsuccessful?  How realistic are your fundraising targets for 2026/27?  Will anything impact on your ability to generate income in the same ways as you have in the past? Have you considered new approaches to generating income? What is your organisation’s reserves position?  Is this sustainable?  If not, how will you deal with this?  Sources of support  ------------------- * For support with financial management, visit the SCVO web pages on [Finance and Business Management](https://scvo.scot/support/running-your-organisation/finance-business-management)  * If you are seeking alternative sources of funding, [Funding Scotland](https://funding.scot/) is a free online search engine   * SCVO’s [Guide to Finding Funding](https://scvo.scot/funding/guide?utm_source=scvo&utm_medium=website&utm_campaign=search) is a useful source of advice and information  * Members of SCVO have access to the Goodmoves salary guide to help benchmark salaries against other organisations in the voluntary sector (you can access this via [My SCVO](https://my.scvo.scot/))  * Use SCVO’s [Fair Funding](https://scvo.scot/policy/fair-funding-procurement/fair-funding) Principles or the TSI Scotland Network [Local Fair Funding Charter](https://tsi.scot/local-fair-funding-charter/) to campaign for better funding    * The [Scottish Third Sector Tracker](https://scvo.scot/research/scottish-third-sector-tracker) can help you to understand trends in funding, and how they are impacting on organisations across the sector  * Third sector organisations can seek emergency support from Community Enterprise, Scottish Community Alliance, Development Trust Association Scotland and CEIS using the [crisis support button](https://sesupportmap.scot/recovery/)  * [The Decelerator](https://decelerator.org.uk/) helps organisations to anticipate and design closures, mergers and service endings  * If you are considering winding up your organisation, the SCVO [guide to closing down](https://scvo.scot/support/closing-down) a charity contains useful advice and guidance  * SCVO members may be entitled to up to 1 hour of free advice from the [Wylie Bisset Group.](https://scvo.scot/services/partners/finance/wbg)  This free service is available to members with an income of under £500,000. Members can receive advice on various areas of financial management, including audits, reporting and finance policies.  Join us at The Gathering  ------------------------- The Gathering 2025 is over, check back later for information about future events. Related training and events --------------------------- ### [Introduction to safeguarding](/events-training/calendar/a1vP100000WUjYNIA1/introduction-to-safeguarding) Online 2 June Training course [Governance & leadership](/events-training/calendar?topic=governance-leadership) [HR, employment & jobs](/events-training/calendar?topic=hr-employment-jobs) [Running your organisation](/events-training/calendar?topic=running-your-organisation) [Learning & development](/events-training/calendar?topic=learning-development) ### [Growing Climate Confidence: ClimatACTical pop-up and play](/events-training/calendar/a1vP100000YCLzbIAH/growing-climate-confidence-climatactical-pop-up-and-play) In-person (The Stove Network) 2 June Workshops [Running your organisation](/events-training/calendar?topic=running-your-organisation) [Learning & development](/events-training/calendar?topic=learning-development) [Climate](/events-training/calendar?topic=climate) ### [All things financial: budgeting and sound financial management](/events-training/calendar/a1vP100000US5bOIAT/all-things-financial-budgeting-and-sound-financial-management) Online 4 June Training course [Funding & finance](/events-training/calendar?topic=funding-finance) [Cost of living](/events-training/calendar?topic=cost-of-living) Waiting list places available [Previous: Politics](/support/shifting-sands/politics) [Next: Society](/support/running-your-organisation/shifting-sands/society) ### [![Third Force News](https://storage.googleapis.com/scvo-assets/test/scvo/images/logos/tfn-lochan.svg?version=0.0.1508)](https://tfn.scot)Related news  [Read more](https://tfn.scot/news) [ ![Placeholder illustration](https://storage.googleapis.com/scvo-platform-assets/scvo/images/placeholder.png?version=) #### Scotland’s search for social innovators reopens 26 May 2026 ](https://tfn.scot/news/scotlands-search-for-social-innovators-reopens "Scotland’s search for social innovators reopens") [ ![Placeholder illustration](https://storage.googleapis.com/scvo-platform-assets/scvo/images/placeholder.png?version=) #### It’s high time we made good on a 50-year old commitment on Human Rights 25 May 2026 ](https://tfn.scot/opinion/its-high-time-we-made-good-on-a-50-year-old-commitment-on-human-rights "It’s high time we made good on a 50-year old commitment on Human Rights") [ ![Placeholder illustration](https://storage.googleapis.com/scvo-platform-assets/scvo/images/placeholder.png?version=) #### Watchdog warns of mounting global pressures as UK reshapes its approach to aid 22 May 2026 ](https://tfn.scot/news/watchdog-warns-of-mounting-global-pressures-as-uk-reshapes-its-approach-to-aid "Watchdog warns of mounting global pressures as UK reshapes its approach to aid") --- ## About SCVO SCVO (Scottish Council for Voluntary Organisations) is the national membership organisation for Scotland's voluntary sector. Our role is to champion the role of voluntary organisations in Scotland and to support them to do work that has a positive impact. SCVO supports members and the wider voluntary sector with all aspects of setting up and running a voluntary organisation. SCVO represents the needs and concerns of the voluntary sector to the Scottish government in Holyrood and UK government and Westminster. Through our learning and events programme SCVO offers training and development opportunities to the sector. Members access an extensive membership benefits package including specialist, in-depth, 1-to-1 guidance from our Information Services team and from professional service partners. Access to exclusive membership networks (including comms, employers, governance and policy) supports members to grow their connections, stay up to date, exchange ideas and views with peers, and learn through tailored, learning opportunities. SCVO members enjoy free access to Funding Scotland Premium to stay on top of funding opportunities to support their organisation’s financial resilience. Discounts and savings savings on SCVO products and services (including our HR service, managed IT support, payroll service and events and training) and partner offers provide members with support to allow them to focus on delivering their organisation’s goals. Further SCVO products and services include [extensive digital support](https://scvo.scot/support/digital), a climate action resource [Growing Climate Confidence](https://climateconfident.scot), a voluntary sector publication [Third Force News](https://tfn.scot) and a voluntary sector jobs and recruitment service [Goodmoves](https://goodmoves.org). For more information on SCVO membership, visit [SCVO membership](https://scvo.scot/membership)