Research also found a third of organisations were dipping into reserves
An overwhelming majority of charities in Scotland have reported financial challenges as their biggest source of concern. The Scottish Third Sector Tracker has found 7 in 10 charities cite financial challenges as their biggest challenge, up significantly in just two years.
Data from the tracker observes the emergence of the sector from the Covid-19 pandemic through 2021, followed by the development of the cost-of-living crisis and associated organisational concerns during 2022 and 2023.
Throughout the waves of research, the frequency with which organisations have reported financial challenges has hugely increased, and in the most recent data collection (April 2023), these were the most frequently reported challenges (71%), compared to just less than half of respondents (47%) just two years ago.
It is concerning that a third of organisations reported having made use of their financial reserves in the 3 months leading into April 2023, an increase compared to the same period in 2022.
Almost half (44%) of the organisations using their financial reserves believed that this situation is unsustainable.
Anna Fowlie, Chief Executive of the Scottish Council for Voluntary Organisations (SCVO), said: “Charities, community groups and social enterprises can be financially fragile at the best of times, and the Tracker research clearly demonstrates that we are currently far from the best of times.
“We are seeing that voluntary organisations are experiencing more financial challenges now than they did during the pandemic due to rising costs, particularly of energy and wages.
“Voluntary organisations make an invaluable contribution to Scotland’s social and economic fabric and the people, communities and causes they support are experiencing more pressures than ever before. Public giving of money and time have been hit by the cost-of-living crisis and we are seeing many organisations having to dip into their reserves just to keep going.
“Reserves are there as a safety net and are not meant to prop up business as usual. It’s akin to households having to buy their groceries on a credit card, simply storing up more problems for the future and threatening their medium to long-term viability.
“Everyone can play a part in supporting the sector, whether it is government and councils ensuring there is fair and sustainable funding in place, philanthropic funders investing their money wisely and the public giving when they can.
“A good start would be Scottish Government passing on the money that the UK Government allocated for energy bills relief to see charities through the winter months.”
The Scottish Third Sector Tracker is a growing research community made up of representatives from third sector organisations based across the whole of Scotland, who are willing to share their experiences, views and concerns as the sector faces both new and ongoing challenges.
The Tracker is run by an independent research company called DJS Research on behalf of SCVO, the Scottish Government, the William Grant Foundation and the National Lottery Community Fund.
Those involved in the running of a third sector organisation operating in Scotland are invited to represent their organisation as a member of the Scottish Third Sector Tracker.
An Executive Summary of the Scottish Third Sector Tracker’s First Phase of research can be found here:
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