Small charities struggle against the dominance of larger organisations: insights from charity commission's annual return analysis

The recently published annual return analysis for the year 2022 sheds light on the stark disparities within the charity sector, painting a picture of challenges and inequality. In a world where charity work often signifies hope and support for those in need, the latest findings from the Charity Commission reveal a concerning trend: smaller charities are facing an uphill battle against their larger counterparts.

According to the data, while larger charities have experienced growth in both income and expenditure, smaller charities find themselves in a precarious position, with expenditure often surpassing their income. This alarming discrepancy underscores the vulnerability of smaller organisations, which are struggling to sustain their operations and fulfil their missions.

The figures speak volumes: total gross income for all charities increased by 8.48% in comparison to the previous year, reaching a staggering £90.3 billion. Yet, this growth has predominantly benefited larger charities, with those boasting an annual income above £500,000 witnessing a substantial 38% increase in fundraising income. Meanwhile, smaller charities, with incomes under £500,000, saw only a modest 3.24% rise in income, accompanied by a troubling 11.6% surge in expenditure.

One of the most concerning aspects of this disparity is the decline in government grants received by smaller charities. While larger organisations may have alternative revenue streams, smaller charities often rely heavily on government support to sustain their operations. The data reveals a significant drop in grants from local or national government sources, leaving smaller charities grappling with funding shortages and financial instability.

Furthermore, the analysis highlights the increasing reliance of charities on government contracts, a trend that disproportionately benefits larger organisations. With almost 6,500 charities providing services via government contracts in 2022, valued at £9.3 billion, it's evident that smaller charities are at a disadvantage in accessing such opportunities, further widening the gap between them and their larger counterparts.

Volunteerism, a cornerstone of charitable work, also reflects the disparities within the sector. While overall volunteer numbers have increased, certain types of charities, particularly those providing front-line services and support to armed forces personnel, have experienced a decrease in volunteer figures. This divergence underscores the challenges faced by smaller charities in attracting and retaining volunteers, hindering their ability to deliver vital services to their communities.

As Helen Stephenson, CEO of the Charity Commission, rightly points out, charities are an integral part of our communities, embodying resilience and compassion. However, the current landscape presents a sobering reality: smaller charities are struggling to survive in the face of mounting pressures. The cost-of-living crisis and inflation have only exacerbated the financial strain on these organisations, threatening their sustainability and effectiveness.

In light of these findings, it's imperative that stakeholders within the charity sector and beyond take proactive steps to address the inequities and challenges faced by smaller charities. This may involve advocating for increased government support, fostering collaboration between larger and smaller organisations, and implementing policies that promote inclusivity and sustainability within the sector.

In light of the gravity of the situation, it may be necessary for the Competition and Markets Authority (CMA) to launch an investigation into the dynamics of the charity sector and assess the impact of market concentration on smaller charities. By conducting a thorough inquiry, the CMA can identify potential anticompetitive practices and recommend measures to promote fair competition and protect the interests of smaller charities.

Ultimately, the publication of data from the annual return serves as a crucial reminder of the evolving landscape of the charity sector and the urgent need for collective action to ensure the viability and vitality of all charitable organisations, regardless of sise. Only by working together can we create a more equitable and resilient future for charities and the communities they serve.