Research carried out for the Charity Commission has found that 59% of charities in England and Wales report having been affected by the downturn, up from 38% in September 2008 and 56% in September 2009. Of those affected, 62% have experienced a drop in income.
The Charity Commission's fourth Economic Survey of Charities surveyed 1,010 charities in England and Wales. Larger charities, with incomes of £100,000 or more, have been hit hardest, with 79% feeling the impact of the downturn and a third seeing an increase in demand for services.
However, 84% of all charities said they were optimistic about the outlook for the next year, an increase on the 69% expressing optimism six months ago. This positive attitude was tempered: 47% of charities expect the recovery of the charity sector to lag behind that of the rest of the economy.
Investment income continues to be the most affected source of income for the charities surveyed, with 62% of charities with investments having seen a decrease in the past six months.
The Commission commented on the proportion of charities that rely primarily on public sector funding. The research shows that 24% of charities with an income of £100,000 or more consider public sector funding to be their most important source of income. The anticipated cuts in public sector spending may affect many of these when many public service delivery contracts between charities and public sector bodies end in March 2011.
Dame Suzi Leather, Chair of the Charity Commission, said: "Clearly severe cuts lie ahead in both local and central government resources; many local authorities are already identifying spending on the voluntary sector as being vulnerable. There is a real concern that charities which receive money from the public purse to fund their valuable work could find themselves at a financial cliff edge in March 2011.
"... These charities should ask themselves: can we take steps to increase our chance of winning local contracts? Could we collaborate with another charity to reduce costs? Or are there ways to diversify our income? The Commission has produced advice and guidance to help charities during what is a very difficult and unsure time".