Giving and the economic downturn

29/10/2008

Recent events in the stock markets will make it more difficult for your favourite charities to raise funds. Research indicates fundraising results roughly correlate with economic conditions and in particular personal income. We also know that fundraising is what is termed a ‘lagging indicator’  - while it follows the economy there is often a marked delay in the impact of any downturn. Fundraising income may not even begin to slip until after the economy has begun to recover.

Charities that raise funds from grant making trusts or foundations will be among the hardest hit. Many trusts hold considerable assets invested in the stock market and their portfolios will therefore have reduced in value. As many grant makers give away a percentage of the interest they earn on these investments, their ability to support charities will be reduced in proportion to the fall in their earnings.

Corporate donations too will be hit as profits decline. Clearly some sectors will be hit harder than others, but many manufacturing organisations will struggle in the coming months and their giving (at least their cash giving) will be reduced as a consequence. Unfortunately the manufacturing sector is one of the most generous in its support of the work of UK charities.

Data from previous research suggests that individual giving will also be affected by the recession, but the nature of this impact is complex. People do tend to continue to support their favourite organizations and can even increase the amounts they give, but they are less willing to take on any new causes or organizations. It is therefore a tougher environment for charities to find new friends and supporters.

As the UK heads into a recession, charities will be increasingly reliant on their existing individual donors for donations. We would therefore urge you to continue your support.