More than three in five (61%) of charities say they are likely or very likely to reduce their workforce, while two in five (80%) are exploring cost-cutting measures.
Following the government’s latest Budget, the Charity Finance Group (CFG) found more than one in three (67%) expect to cancel plans for expansion, including recruiting new staff and introducing new services. Two in five (40%) are very likely to do so.
Nearly nine in ten (87%) expressed concerns about the affordability of the rise in employer National Insurance contributions (NICs) from 6 April 2025 in addition to the National Living Wage (NLW) and National Minimum Wage (NMW) increases.
The 446 charities surveyed by CFG included those from a wide range of sectors and services.
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To mitigate the effects of soaring costs, many of those polled plan to implement pay and recruitment freezes, not backfill vacancies and cut jobs, as well as increase fundraising efforts, apply for more grants, reduce charitable services and activities, increases charges for paid-for goods and services and hand back local government contracts.
According to the CFG, while these measures are necessary for sustainability, they could have wide-reaching consequences for the community services provided by charities.
Caron Bradshaw, CEO of CFG, said: “Since the Budget announcement in October, thousands of charity leaders and finance professionals have expressed that they are desperately on the financial back foot once more. I am very concerned about the financial health of the sector and its ability to weather yet more economic distress.
“They are having to move very fast to find ways to attempt to mitigate this unexpected and sharp increase in operating costs, so that they can be there for the people and communities they serve and to meet increasing demand. However, many have few remaining options available to them, having done everything possible to stay financially afloat during the pandemic and cost of living crisis.”
She warned the fact that requirement for charities to absorb the rise in NICs “comes with consequences” and urged the government to work closely with the charitable sector to find ways together to mitigate the risk of closures in the coming year.
Bradshaw added: “It is inevitable that many will cut services and activities, and headcount. This will have an immediate impact on those who rely on our sector which is too often plugging the gaps in public services and acting as a safety net for the most vulnerable in society.
“The government is right in saying that its decade of renewal cannot happen without our support. We are pivotal to all areas of a well-functioning society. We believe we are valued by government, and we appreciate the difficult choices that are needed, but we need the government to truly understand and consider the impact of their financial and economic decisions on our sector.”
Richard Sagar, head of policy, CFG, said: “The rise in employer NICs and the reduction of the threshold in the NI secondary threshold from £9,100 to £5,000 has come as a shock to many. Together with the increase in NLW and NMW, these changes mean that charities are now quickly recalculating and reassessing their plans for 2025 and beyond.”
While the rise in Employment Allowance is to be welcomed, many charities will not benefit from it, and it will still not offset the increase in NICs for those that will claim, he insisted.
“We will continue to work with government policy-makers to ensure the voice of our sector is heard and that charities are supported in every way possible so that they can continue to make the biggest difference possible in their communities,” he added.
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