Economic downturn

Although the UK has emerged from recession, growth remains weak and fears of a 'double-dip' recession and a new global slowdown persist. Economic output remains below the pre-recession peak in 2007. The consensus of independent forecasts for the UK as tracked by the Bank of England predict that unemployment will peak in 2013, and that growth may not return to pre-downturn levels until 2014. The fall-out will continue  to have a significant impact both on the needs of beneficiaries and the availability of funding for VCOs.

What are the implications?

  • A prolonged period of testing economic circumstances, with austerity 'the new normal'.
  • Reduced tax revenue and rising welfare costs will constrain public expenditure - some existing services will face cuts, and there will little money for new iniatives.
  • Reduced income from government, leading to an even greater focus on efficiency and value for money and changes to levels and sources of income.
  • Interest rates are likely to remain low to stimulate growth, while stock market uncertainty is likely to continue.
  • Unemployment (see labour market) and debt will lead to increased levels of poverty and hence to higher demand for services delivered by the VCS, particularly welfare services, advice and counselling.
  • Rising unemployment as the private sector stagnates and public sector employment falls.
  • Income may fall – individual giving fell briefly but rapidly recovered to former levels, while corporate giving tends to follow economic cycles more closely.
  • Charities’ investment and legacy income will be affected by the changing value of assets (stock market, bank deposits, property) and lower interest rates.
  • Weak investment performance will mostly hit trusts and foundations – evidence suggests that a majority will maintain or reduce grantmaking.
  • Certain areas of the VCS may emerge stronger from the recession (as did homeless charities after the 1980s recession).

Moving forward

It is more important than ever for organisations to plan ahead, in particular to establish how the recession has affected the organisation’s funding streams and beneficiaries.

The downturn may affect your finances.

  • Are your funding streams secure?
  • Do you have sufficient reserves, and how will you use them if the worst happens and you face a significant

Your beneficiaries may be directly affected by the downturn leading to increased demand for your services.

  • Do you need to rethink your priorities?
  • Will there be an increased demand on your services or a need for new services?
  • If you have to reduce your services due to lack of funds, how will you decide which services are most valuable to your beneficiaries.

There may be new demands on your workforce as well as opportunities for recruitment.

  • Does your workforce have the opportunities to use and develop their skills and expertise?
  • Do you have a strategy to attract the volunteers you need, especially the pool of highly-skilled newly unemployed?

It may be useful to collaborate with other organisations.

  • With the sector facing the squeeze, collaboration can enable you to achieve more and accomplish your aims, despite having fewer resources.

Want to know more?

Future scenarios for a short, shallow or long, deep recession

Published by: NCVO 

Date: 2009

Format: Web and PDF

What is it? Four scenarios that explore the possibilities of a short, shallow or a long, deep recession alongside a change in government in 2014 developed in a NCVO Policy Forum Seminar. 

How useful is this? A change of government and the recession were selected by participants from a range of VCOs as the two highest impact, most unpredictable drivers likely to impact upon the public policy agenda and policy making in the future.  The possible scenarios envisaged are particularly useful to anyone interested in how the economic downturn coupled with a change in government may impact upon their organisation.

Other comments: The imagined scenarios are examined in more detail in the comments on the original web page. This also raises more questions for organisations to consider.

Economic downturns and the voluntary and community sector: a short review of the evidence

Published by: NCVO

Date: November 2008

Format: PDF and Powerpoint

What is it?: A 13 page paper summarising the available evidence on how an economic downturn impacts on the voluntary and community sector, including reference to 54 sources, some of which are freely available (see below).

How useful is this? This gives relevant data to allow the potential effects of the recession to be judged objectively. It gives a succinct account of many different aspects of the VCS and how they may be affected.

Other comments: There is also a short summary of the paper and accompanying Powerpoint slides.

Forecasts for the UK economy

Published by: HM Treasury

Date: Monthly

Format: PDF

What is it? Monthly summaries compiled by the Treasury which compare and contrast independent forecasts of key economic indicators.

How useful is this? The summaries contain a comprehensive range of independent forecasters with detailed tables of data forecasts. The averages are then collated in easy-to-read charts. The forecasts do not provide any new information on Treasury's own views and no significance should be attached to the inclusion or exclusion of any particular forecasting organisation which is subject to review.

Other comments:

Last updated at 16:32 Fri 13/Jan/12.

Recent comments

AuthorComment

The latest headline news from the third round of the recession survey in the north east (carried out by infrastructure organisation VONNE) • 70% find funding Core services the most difficult funding challenge (with 64% wanting additional support in this area) • 90% receive income from the public sector • Two thirds are using reserves as part of their income • 51% have seen a decrease in funding • 57% have increased the number of beneficiaries they support • 78% have seen an increase in demand for their services • 21% have decreased the number of paid staff they employ • 38% have increased the number of volunteers they utilise • 52% have increased the number of services they provide • 16% anticipate making staff redundant in the next 12 months • 41% anticipate increasing the number and type of beneficiaries they support in the next 12 months • 42% have asked for more assistance with bid writing, while a third asked for support on tendering for contracts.

A full report and detailed analysis will be available shortly from the VONNE website www.vonne.org.uk

Fears grow over potential losses in infrastructure organisations Results from the latest VONNE "Surviving not thriving" Survey (carried out April/May 2010) reveal that the demand for support and development services from frontline organisations continues to rise whilst funding for those VCS infrastructure organisations is increasingly at risk.

Infrastructure organisations are already delivering more for less and are under increasing pressure to meet the rising demand from individuals, VCS organisations and groups. In spite of the challenges, infrastructure organisations continue to provide essential local development and support services to enable VCS organisations to establish, grow and adapt. 43% have seen an increase in beneficiaries and 71% have experienced an increase in demand for services. More than half (52%) have increased the no. of services they provide in response to demand.

Infrastructure are demonstrating their ability to be responsive and flexible, but with huge funding cuts and the end of specific funding programmes on the horizon, there are questions over how much longer this can continue. Infrastructure services are now at risk – 4 could close all together in the coming twelve months. A third of organisations expect to close a current service (33%) and almost a third forecast making staff redundant (29%).

The majority of infrastructure organisations rely on public sector funding and grants. Public sector grants and contracts make up more than 50% of funding in just under a third of organisations. 14% of respondents rely on public sector funding for more than three quarters of their income. 50% are now dipping in to their reserves, mostly to meet the rise in demand for core services.

Over a third may consider mergers as an option but there are no definite plans to do so.

For further information, please go to our pages on this

Kathryn's picture

Kathryn

Third Sector Foresight

[1]If you're an infrastructure facing these issues, have you had a look at our infrastructure resource pages? We offer training - to be running in East Anglia, North West and London; a training pack and bulk copies of our future focus for free.

Have a look as well at the NCVO pages on this.

Thanks Amanda, these recent figures on the challenges being faced by infrastructure organisations are interesting...and alarming!

If we want civil society to be bigger and stronger than ever before then the role of infrastructure in developing, connecting and representing the sector is vital. My fear is that infrastructure gets 'lumped in' with government bureaucracy and the fact that many infrastructure organisations have grown organically from the sector to support it is not recognised. I recently wrote a short piece about the infrastructure's potentially huge contribution to the government's Big Society agenda.

Unfortunately, infrastructure organisations have sometimes struggled to demonstrate the difference they make. Despite having national programmes of funding, there is no national picture of value. This does not mean that there is no value in the work but just that being a step, or sometimes two, from the impact 'on the ground' means that it is harder to evidence and really understand.

Over the past year we've been working with a wide range of infrastructure organisations (through the Value of Infrastructure Programme) to develop a shared picture of the intended impact of infrastructure and tools to evidence this. Having a shared approach means that infrastructure organisations can compare information on what works to achieve the biggest impact.

The figures in your recent report are very useful as they contribute to a picture of need for (and threat to) infrastructure support. We hope that in pulling together evidence of need, information on impact and new knowledge of 'what works', then in future we can build a national case for the value of infrastructure.

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