020 7993 5371 matt@daviesis.com

The number of charities facing insolvency is likely to rise in the year ahead as the voluntary sector faces a ‘perfect storm’, a leading insolvency expert warns.

Matt Dunham, a Council member for the insolvency trade body R3, said the latest criticism of charity fundraising tactics would add further pressure at a time when charity finances were already under strain from cuts in local government spending and a fall in legacy income, amongst other factors.

His comments follow criticism of charities’ commercial arrangements with energy or financial services providers, and allegations of aggressive street collecting and cold calling.

Mr. Dunham said: “Clearly aggressive fundraising tactics and misleading commercial arrangements are not acceptable and charities need to ensure they are following best practice at all times,” he said. “Unfortunately this controversy could not have come at a worse time. Charities which deliver local services on behalf of local authorities are being affected by spending cuts and facing competition from commercial service providers. Legacy income has been falling and the rise in the minimum wage has pushed up costs.

“Over the past year, we have already seen a rise in the number of charities in financial difficulties and expect the number of insolvencies in the sector to rise in the year ahead.”

There are over 160,000 charitable organizations in the UK, with over 30,000 in the North West. A study by the Third Sector Research Centre found that charities employ over 1.1 million people in the UK, including 132,000 in the North West. According to the National Council for Voluntary Organisations, income has been falling each year since 2009/10.

Mr. Dunham added: “Charities have to strike a difficult balance – maintaining the focus on their mission but at the same time ensuring they are financially sustainable. If they concentrate too much on their charitable mission they risk running out of money, but if they become too commercial they risk a public outcry.

“The year ahead will be a really testing time for managers and trustees. Where organizations do face financial problems, it is important to take professional advice at an early stage. Even where the situation looks bleak, there may be solutions such as mergers or shared services that enable them to continue their good work.”