If you’ve ever played Jenga then you’ll know the importance of having stable foundations. Loose foundations make for unstable towers. The slightest knock can bring an unstable tower tumbling. As we enter 2017 the UK charity market feels a lot like a game of Jenga. The foundation of the charity sector is made up of an over-reliance on government funding, in fact May (2016) reports that 52% of micro-charities identify “grants as their primary source of income” according to LocalGiving’s ‘Local Charity & Community Group Sustainability Report 2016’. Increasing use of advancements in digital technology and positive retail trends mean that blocks continue to be added to the top of the tower but the results of welfare cuts mean that the tower’s foundations are beginning to wobble. With a ‘Hard Brexit’ appearing increasingly likely following Theresa May’s latest speech, an economic downturn being forecast for the UK in 2017 is probable. More welfare cuts could undo the progress being made on this tower. A word of advice for Theresa May’s government; be careful where you take the next block.
Whilst this paints a largely bleak outlook, there are some developing trends in the market that do provide rays of hope.
Key Note (2016) reports that, “the total annual income generated by all main charities in the last year has increased by 7.5%” from 2014 to 2015. Financially, the trends appear to be positive and if we continue to look at some of the other trends in the sector then the positivity largely continues.
Figure 1: ‘Charity Shop Spending Infographic’, statistics from Key Note (2016)
The growth in popularity of vintage shopping has made charity shops a regular high street destination for shoppers. As you can see from the infographic above, Key Note (2016) reports that spending in charity shops has been on the rise in recent years, reaching as high as £529m in 2014 and has even “become one of the fastest-growing areas of the UK retail industry”. The continued decline of household budgets is another major factor behind this growing trend. A ‘Hard Brexit’ is likely to see this continue, as household budgets experience more downward pressure, expect to see shoppers continue to head to charity shops on the lookout for bargains.
Figure 2: ‘To paraphrase the Smiths, Some Trends Are Cuter Than Others’. Baguley (2017)
Whilst we continue to look on the lighter side of the sector, charities are beginning to make progress using digital technologies. Similar to a lot of markets, the effects of social media have caused tidal waves of progress for charities. Body and Breeze (2016) argue that previously the mass media acted “as a gate-keeper” on what social issues were on public radar, whereas “communication messages can now be spread more democratically through diverse networks of individuals”. No longer reliant on mass media, social media has put some power in the hands of the charities and the donors who choose to support them – the ASL association and the ‘Ice Bucket Challenge’ is a good example of this, the challenge went viral and Key Note (2016) reports that over £7m was raised. This figure would have been largely impossible without the charities use of social media, so would the audience of Save The Children’s (2014) video that went viral and reached an audience of little under 56 million on YouTube alone.
Another aspect of the technological trend is the willingness of charities to experiment with emerging technology; Baguley (2017) highlights an example of this when he states that “the British Legion, Cancer Research and the Blue Cross are trialling contactless donations”, demonstrated rather nicely in the image above. We can expect this trend to continue as technology has become an increasingly important factor in many of our lives. One aspect of progress to watch out for is with Gaming Apps, where Key Note (2016) reports that “the popularity of gaming apps has seen organisations launch apps that integrate both gaming and charitable donations”. The Charity Tap game is a fantastic example of this; the game donates funds to the UN World Food Program based on the users’ virtual performance. The environmental charity sector has also been an area of progress. Flooding in the UK over recent years has helped to bring home the impact of climate change, so it is little surprise that Key Note (2016) reports that environmental charities are “a key area of growth in the third sector”. With a new President across the pond who is likely to oppose environmental progress; we can expect a lot of media coverage on this topic in 2017 so don’t be surprised to if this trend continues.
Just Keep Giving, Just Keep Giving…
Donor demographics make for an interesting trend in the charity sector as well. ‘Dorothy Donor’ remains the largest supporters of charities but Key Note (2016) reports that “the level of donation increase has been more significant among the younger generations, with a 30% uptake in donations”. There is scope for this trend to develop further as well, with Key Note (2016) stating that “younger age groups are less commonly targeted by charities”. The increasingly digital face of the market means that this is a trend that is likely to develop in 2017 and beyond, although any economic downturn will probably slow the progress being made.
Figure 3: ‘A Strong Foundation Infographic’, statistics from Sargeant and Shang (2016)
There is a social trend in the charity market that counters the ‘Jenga argument’, and that is the large support base that the sector has in British Society, as demonstrated in the infographic above. This is supported by Theresa May’s ‘Shared Society’ agenda that “will be warmly, if cautiously, welcomed across the charity sector” according to the argument of Smith (2017). A large support base is plain for all to see but, as the graph below illustrates, the market is becoming increasingly top-heavy.
Figure 4: ‘Income of Large Charities as a Percentage of Total Registered Charities’ Income (%), Years Ending 31st December 2011-2015’. Key Note (2016)
Key Note (2016) reports that “over the last 5 years, the number of food banks located across the UK has rocketed” with an estimated 13 million people currently living below the poverty line, “creating more demand on charities in this sector and more food banks are anticipated to be rolled out to meet the need in the future”. This trend is worsened by the figures from LocalGiving’s ‘Local Charity & Community Group Sustainability Report 2016’; May (2016) reports that “78% of groups predict further increases in demand over the coming year”, of which “18% said they felt sufficiently resourced to meet this demand”. It is clear that supply is struggling to keep up with demand; the scales unbalanced. Theresa May has promised to trigger Article 50 in March 2017, and if the growing talk of a ‘Hard Brexit’ is to be believed then we can expect the pressure on smaller charities to increase.
Won’t somebody please think of the data?
Increasing demand and economic downturns aren’t the only worry for the charity sector. There is another cause for concern; data.
Data has become increasingly significant for organisations in recent years, as they been able to garner more analytics about large groups of consumers in order to develop relationships with them. The charity sector is no different. However, the data regulations are changing and consent is becoming increasingly significant. Cave (2016) reports, from research carried out with Adestra, that “nearly a quarter of marketers (23.5%) are using data collected by automatic methods” where consent is unclear. In the week that The Charity Commission (2016) and the Fundraising Regulator issued a joint alert, about compliance with data protection law, “2 charities have been found to be in breach of the Data Protection Act and have been issued with monetary penalties by the Information Commissioner”. The Charity Commission (2016) highlights the quotes of David Holdsworth, Chief Operating Officer and Registrar of Charities for England and Wales, that “practices that some charities consider ‘common practice’ are in breach of the data protection requirements” and Stephen Dunmore, Chief Executive of the Fundraising Regulator, who described the monetary penalties issued to the two charities as “a wake-up call for the whole sector”. There is clearly a steep learning curve ahead for many in the sector.
Data is important to charities but compliance even more so. As the graph below shows, trust has fallen during the last two years. This hasn’t been helped by high profile cases, including the fall of Kids Company in 2015, hitting the news. May (2016) reports that “79% of groups have received funding from the general public in the last 12 months” so public image needs to be considered with every steps that charities take. The General Data Protection Regulations, which come into force in May 2018, provides the charity sector with an opportunity to halt the decline in trust. But failure to stop the slide could do more damage still. It is no surprise then that Cave (2016) states that “2017’s success stories in the third sector will be those that are able to put supporters and their personal data at the heart of everything they do”.
Figure 5: ‘Changes in Public Trust and Confidence in Charities’. Shawcross (2017)
Two steps forward, one step back
The political and economic landscape adds bleakness to the image of the charity market. But you cannot ignore the progress made in using digital technology, nor the opportunities to get a larger following in younger audiences and to use data appropriately. There are signs of progress, opportunities and challenges for the market over the next year. As Medcalf (2016) puts it, “if you thought 2016 was a tough year, 2017 looks set to be just as challenging”. The impact of a ‘Hard Brexit’ will add pressure to the tower, but there is an opportunity are there to build the tower so that it’s strong than ever before.
Written by Harry M Carrington.
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