Will the cost of living crisis overwhelm the charity sector?

In the insurance world we’re most anxious when heavy rain hits already sodden ground. It’s sure to result in flooding because there’s nowhere for the water to go – the landscape is already overwhelmed.

It feels like the cost-of-living crisis is putting charities in a similar position. They have been weathering storms for years and coping with floods of demand. The cost-of-living crisis is creating another deluge and surely charities, and everyone and everything they support, will be overwhelmed.

Demand for charities’ help is off the scale, their costs including energy and staffing are spiralling, and donations from the public are drying up. They are smack bang in the middle of a perfect storm.

We’ve seen a huge range of charities struggling with demand for their services. Food banks are front of mind, but the pressure is also being felt by community centres, mental health services, financial advice support and animal shelters to name a few. A pressure on the cost of living puts the squeeze on every aspect of our lives.

The media also focuses on households and small businesses as the main victims of spiralling energy costs. But charities are equally affected. The NCVO reported recently that charities were experiencing a 300% increase in their energy bills. They are often running on incredibly tight margins as it is and have very little ability to absorb extra costs.

The cost of living is hitting everyone’s pockets and sadly charitable donations are often the first extra ‘expense’ to get cut.

Understandably public goodwill is under strain as well. The cost of living is hitting everyone’s pockets and sadly charitable donations are often the first extra ‘expense’ to get cut. Three in five of us are considering reducing charitable donations this year. Where donations are going is also shifting – people are much more likely to give to local community causes than national charities for example. I guess if we’re going to give to anything we’d rather we saw the benefit as close as possible to our doorsteps.

Lastly, it’s important to highlight that the armies of employees and volunteers who are at the heart of our charities are, in many cases, exhausted. Mental health in the sector has taken some huge hits. Resilience has been tested to extremes during the pandemic. Many employees and volunteers have reflected and made a move out of the sector, in some cases for more competitive pay.

So with all this in mind, how can we possibly expect charities to cope? And is there anything we can do to support them?

We’ve got huge faith in the resilience and versatility of the charity sector. It is built to respond to need and it never fails to do this. Many charities will have to dramatically change focus and plans – we’ve seen this through some of our large grant programmes. But if we expect our charities to step in again they do need more support. That’s why we’re a signatory to the Directory of Social Change’s call to Government for support for the charity sector. We can’t see them fail and need to act now. We’re also focusing £250,000 in £1,000 donations on charities who have been nominated by our customers, partners, employees or supporters. It’s a modest amount in the context of how much is needed, but we know it will make a difference.

There are some rainy days for charities on the horizon, and the scale of the damage may well be huge, but we continue to be confident that our charities will prevail.

The Benefact Group is a family of responsible insurance, investment and advisory financial services businesses and one of the top company donors.

Communities who have barely taken a breath since the last lockdown now find themselves facing an even bigger struggle to make ends meet this autumn as the cost of living in London soars. We must stand in solidarity with our fellow Londoners who will be at the sharp end of this crisis and with the incredible local heroes who run our local community organisations and charities.

Find out more about how you can support London's charities and donate to our Together for London cost-of-living appeal.