CEO blog | Understanding the funding crisis in the UK voluntary sector
29 October 2024
Carol Mack, ACF chief executive, examines the rise in grant applications and takes a deeper look at how foundations are responding. She goes beyond the headlines to look at the key issues effecting the sector.
Hardly a week goes by without news that another charity has closed its doors, unable to secure the funding it needs to keep going. Behind each closure lies a heartbreaking story: vulnerable people losing vital support, communities losing much-loved institutions and dedicated staff losing their jobs.
Funding for UK charities and voluntary organisations has seen sharp declines across the board: central government funding decreased by 33% from 2022 to 2023, local authority funding dropped by 23% since 2009-2010, and individual donations have fallen by 14% in recent years.
A surge in demand
Grant-making charities and foundations report a stark reality: grant applications have surged by a reported 30-50%, with some foundations seeing their number double. This dramatic increase isn't just about numbers – it represents thousands of organisations desperately seeking support to continue their vital work.
This surge is placing immense pressure on foundations' ability to maintain the quality and equity of their grant-making processes. Many operate with small teams to maximise funds for grants, but this lean approach is being stretched to its limits.
Foundations ‘pausing’: beyond the headlines
With funding so tight, it’s understandable that recent coverage of some foundations pausing grant-making activity is causing concern. However, the picture is more complex than initial headlines suggest. Total grant-making by the foundation sector is actually increasing.
UKGrantmaking reports a 13% rise in the last year, 3% over and above the rate of inflation, following an impressive 13% rise in real terms during the pandemic. Rather than pulling back post-Covid to replenish assets, foundations have continued to step up their support in response to the cost of living crisis. The problem is that accessing this additional support has become increasingly challenging due to rising demand and falling income from other sources.
Demystifying ‘pauses’
The terms 'paused' and 'closed' often mask a more nuanced reality. Very rarely does a foundation completely stop all grant-making. Instead, these pauses typically apply to new applications - with existing commitments and/or continuation funding to current grant-holders continuing. For example, one foundation - widely reported as ‘closed’ - distributed £20 million in grants last year to its existing grantees.
Those foundations pausing new grant spending are often doing so because they need a new strategy for how to operate with a higher level of demand. It's a necessary step to ensure their resources can be used most effectively in this changing landscape.
Often, these pauses have a really positive impact for grant-seekers: one of our members recently closed for three months to restructure their grant programmes and reopened with higher funding amounts and a new programme better aligned with applicants’ needs.
In other cases, the term 'pause' simply reflects better communication. For instance, one foundation described as 'paused' had already committed their yearly funds and were communicating there would be no further rounds. They're not giving less, they're just being more transparent about when their funds are fully allocated.
One of the foundation sector's key strengths lies in its plurality: there are around 10,000 foundation funders in the UK. While some foundations may pause certain programmes, others maintain or increase their spending. This plurality ensures continued support across the sector, even as individual foundations adapt their approaches.
Finding solutions together
ACF’s Stronger Foundations framework of ambitious and effective foundation practice advises regular review of grant programmes as essential practice to ensure continued relevance and impact. It also emphasises the importance of foundations considering the impact of their actions on those who seek their support.
In these difficult times we are encouraging members to:
While these steps can’t resolve the core issue - that demand far exceeds available resources - they can perhaps ease some of the growing tension between funders and the funded. Ultimately, foundations know that they can only fulfil their missions in partnership with the organisations and individuals that they support.