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Oxfam charity shop in Kendal Cumbria, 2020. 

Falling income, redundancies and programme cuts: can NGOs survive the next two years?

7 October 2020
Author: Mike Wright

Only about half of Bond’s members are likely to be in operation in two years’ time, putting programmes that support marginalised communities at risk. 

Bond’s latest financial survey of 93 members reveals grim prospects for INGOs in the UK. The Covid-19 crisis, Brexit, recession and cuts to official development assistance (ODA) were cited as the biggest threats to NGOs’ existence.  

Here are the most worrying findings, from concerning income projections to staff redundancies and cost-saving measures.

48% of NGOs may not survive the next two years

Our survey indicates that NGOs’ financial situations will get significantly worse. On current financial projections, only 52% of organisations can see themselves operating after 24 months

24% of organisations expect to close within the next 12 months, unless the funding picture drastically changes. 40% of those organisations are small.

Small and medium-sized organisations are most at risk. Only 29% of small NGOs expect to continue operating after two years. With 260 small organisations in the Bond membership, this scenario means that 185 small organisations could close by 2023. 

Only 64% of medium-sized organisations have enough funds to operate beyond 2022. With 125 medium-sized organisations in Bond’s membership, this scenario equates to 45 medium organisations closing their doors. 

Large organisations are not immune to closure, with only 74% able to confirm their future beyond two years. With 55 large organisations in our membership, that could mean 14 large organisations would close by 2023.

Income expected to drop even further

Most organisations are expecting their funding situation to get even worse in the year ahead: 65% of organisations expect their income to fall in 2021-22. Only 13% expect income to rise. 

Large and small organisations are particularly affected by current income generating conditions. 68% of large organisations and 72% of small organisations are expecting income to fall in 2021-22.

Some of the decline in income could be unprecedented, with over a quarter of all organisations surveyed (26%) anticipating falls in income of over 20% in 2021-22, with small (29%) and medium (28%) organisations hit particularly hard.

More staff redundancies 

46% of organisations surveyed have already made or are about to make staff redundant as a result of the Covid-19 crisis. 21% of NGOs have had to make more than 10% of their workforce redundant.

79% of large organisations have made staff redundant. There have been fewer redundancies in small organisations (26%).

Our survey also highlights the job roles that are most vulnerable. The roles that have seen the most redundancies are:

  • those involved in programme delivery, already cut by 53% of organisations 
  • admin and finance, cut by 51% of organisations 
  • public fundraising, cut by 41% of organisations.

Redundancies in institutional funding (16%) and business development (12%) are relatively low, possibly as a result of organisations moving their focus away from public fundraising.

When asked which employees were most likely to be affected by redundancy, 46% of organisations cited those in UK roles, 37% said junior roles, and 32% said fixed-term contract roles. Only 23% of organisations mentioned in-country roles being affected by redundancy.

Cost-cutting measures

Pay freezes (42%), recruitment freezes (47%) and the furlough scheme (49%) have been deployed extensively by organisations of all size. However, only 11% of organisations will be making use of the government's replacement scheme once the furlough scheme finishes at the end of October. 

As part of cost reductions, 20% of smaller and 13% of medium organisations have been exploring mergers and formal collaborations to make their organisations sustainable. 30% of organisations are exploring a reduction in office space, with around 10% of organisations considering becoming fully virtual entities. Larger organisations have focussed primarily on using the furlough scheme (63%) as the main tool for cost reduction.

In terms of organisations refocussing resources during this period, smaller and medium organisations have been more likely to change the emphasis of their income generation, with resources moved towards accessing institutional or government funding (34% of small organisations and 33% of medium organisations). 

Larger organisations are less likely (42%) to have shifted resources. Shifting resources to business development work has been almost non-existent across all sizes of organisation.

How are we supporting the sector?

We're engaging with UK government to help them understand the impact that Covid-19 has had on NGOs’ finances and their ability to serve the communities they support.

As small NGOs are particularly vulnerable to closure,  the government should set up a £10m relief fund to help small NGOs continue to support their local partners and the communities that they work in. Otherwise we risk losing specialist organisations and charities at the heart of local communities in the UK.

Join the Bond Funding Group to find out more. 

 

Read our parliamentary briefing urging members of the house to take action and support NGOs and their partners through the Covid-19 crisis.

About the author

Bond

Mike Wright is director of membership and communications at Bond.