In July 2022, NPC’s guide to the cost of living highlighted that as life gets harder for many in the UK, charities are likely to see demand for services soar. As we get deeper into the winter, this prediction is rapidly playing out across the country. But for a notable subsection of the charity sector in the UK, where services have a cost to users, demand is likely to fall over the winter.
While our recommendations for funders in July focused on supporting charities facing soaring demand, it’s as important that funders put in place a considered response to help charities where demand is falling.
Falling demand is most likely to be seen where charities charge a (often subsidised) fee for a service. Charities affected by falling demand may include arts charities providing ticketed performances and workshops, and community sports clubs with monthly subscription charges or match fees. It might also include youth clubs with weekly fees or session costs, lunch clubs for older people with a subsidised meal cost, or community centres with spaces for rent for small businesses and local activity.
Although the exact impact in terms of falling demand is yet to be understood, anecdotal statistics show its significance. Box office sales at the Sheffield Crucible are down 20% on pre-pandemic levels, and four in five community sports groups surveyed in Scotland set out that the cost-of-living crisis was going to force kids out of participating in activities over the next six months. Significantly, some of this fall in demand was expected even when activities were free – due to indirect costs such as travel or childcare.
“We’ve seen an increase in families coming to us for support because they can’t afford to keep sending their kids. Their fees are already subsidised but it’s still too much and we’re seeing more of that.”
Joe Sneddon, chair of Inch Park Community Sports Club in Edinburgh
There is ongoing work exploring the impacts to these sub-sectors: for example, Arts Fundraising and Philanthropy is convening an enquiry group to explore the impact of the cost-of-living crisis on business models in the cultural sector, and Curious Minds has a live survey to gather data on how it will affect cultural education provision for vulnerable children.
Why does it matter?
Cross subsidy: many charities in this space use earned income from more commercial offers to cross subsidise provision that is harder to fund, but potentially has more impact on users. For example, Mercury Theatre Colchester (which earns 78% of its income) runs a free community programme, which includes holiday provision for children, and is running a warm space this winter. As demand for paid for services falls, there will be an associated fall in charity’s ability to provide this free offer.
Charity sustainability: before the outset of Covid-19, many charities were pushed towards developing earned income streams as the core pillar of a sustainable business model. Then, with the closure of venues, shops and cafés, many of the charities that had been most successful in building commercial income were worst hit. Now, with rising inflation and falling disposable income, it is these charities who are again vulnerable financially. There is a very real risk of the closure of community organisations that rely on earned income, or of organisations having to scale back charitable activity and layoff staff.
Direct impacts on charitable objectives: amid falling demand,charities are likely to double down on offers that are more universally popular or commercial to protect income, rather than continuing commitments to varied programmes that may be more in line with charitable objectives. In the cultural sector, this may mean a lack of artist development for those creating work in less commercial genres. For community sport clubs it may mean a focus on particular sports, resulting in less inclusive offers for those with additional needs.
What should funders do?
Give more: if you’re already funding charities that are affected by falling demand, and therefore changing income, follow the recommendations we set out in our guide to the cost of living. Talk to grantees to understand how costs are changing and where support is needed. If you can, uplift new and existing grants to reflect changes in costs and help to mitigate the impacts of falling earned income.
Give better: if demand has fallen for a project you fund, consider lifting restrictions so funding can be redirected to where demand has increased or costs are changing, or to fully fund a project and remove the need for financial contributions from audiences.
Give differently: if you don’t currently fund organisations in these sectors, consider how they might be valuable in delivering your objectives and reaching the communities that you want to reach. For example, many arts and sports organisations work with those who don’t engage with other charities, and many small community organisations are invaluable in delivering local work such as food provision, social prescribing and befriending services.