Economic downturn

Related drivers

Helen's notes on this driver

In the last decade, pensioner incomes have increased, however, current volatility in the stockmarkets have significantly reduced the value of pensions. It is uncertain as to what impact the current economic crisis will have on pensioner income and high levels of poverty amongst pensioners (2.1 million pensioners currently live in poverty) or whether people may be forced to work longer to make up for the decline in their pensions. Current changes to retirement and pensions may seek to address these issues though the downturn may also limit the government's ability to fund any increases to pensions.

The UK is currently emerging from a long recession. Following six consecutive quarters of falling GDP there has now been two consecutive quarters of economic growth. However the number of people in employment is still falling. The downturn was prompted by key global problems including the 'credit crunch', house price bubbles, volatility in financial markets, and rising commodity prices. Most forecasters expect economic growth to continue, but some warn of the risk of a “double-dip” and a return to recession as levels of public expenditure fall and unemployment rises further.

What are the implications?

Funding from government is likely to fall - evidence from other recessions is that income from government fell - 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 and prevent deflation, unless long term inflationary pressures start to have an effect.
Continued stock market uncertainty until there is sustained growth in both the UK and worldwide economies.
Employment will continue to fall, particularly in the public sector (one of the largest employers in the UK) which could ease skills shortages and lead to a potentially larger pool of volunteers. *opportunity*
The effects of the downturn and notably unemployment and debt will lead to an increase in levels of poverty.
There will be increased demand for services delivered by the VCS, particularly welfare services, advice and counselling as (e.g debt, housing, employment). *opportunity*
Over the longer term, certain areas of the VCS may emerge stronger out of the recession (as was seen with homeless charities after the 1980s recession) leading to changes in the number of general charities and the polarisation of the sector. *opportunity*
People may look to their communities for more support in the short term, which could present new longer term opportunities for community groups (see attitudes to community responsibility.) *opportunity*
Individuals are likely to reconsider their charitable giving – current evidence has shown that charitable giving is falling. However evidence from other recessions is that giving does not fall but that donors focus on causes they already support (see planned individual giving).
It is likely that corporate giving will fall as this has been shown to follow economic cycles more closely than individual giving.
Charities’ investment and legacy income will be affected by the falling value of assets (equities, bank deposits, property) and lower interest rates.
Falling investment income will mostly hit trusts and foundations – evidence suggests that a majority will maintain or reduce grantmaking.

Moving forward

It is more important than ever during these tough times for organisations to plan ahead. It is vital to look carefully at your objectives and funding streams and ensure that you have the strategies in place to deal with any likely changes.

Plan for the downturn now. Look at your funding streams, beneficiaries and costs and plan likely scenarios for your organisation. Be realistic and don’t wait until it’s too late. Can you be more efficient in the way you do things? Can you save money by outsourcing some of your office functions?
Revisit your costs. Use this opportunity to renegotiate contracts with your suppliers (who will need your business more), or see if you can save money by switching to NCVO’s recommended suppliers
Develop your volunteers. Are you making the best use of their skills? Do you have a strategy to attract the volunteers you need, especially the pool of highly-skilled newly unemployed.
Build your network. With the sector facing the squeeze, collaboration can enable you to achieve more and accomplish your aims, despite having fewer resources.
Demonstrate your success. Measuring outcomes and demonstrating impact is notoriously hard to do. However, it is a great way to improve your chances of securing funding.

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The impact of an economic slowdown on the VCS - seminar summary

Published by: NCVO

Date: July 2008

What is it?: A write up of our July seminar on the economic slowdown, including audio files of and slides of presentations from Peter Hahn of Cass Business School and Keith Hickey of the Charity Finance Directors' Group and a summary of the opportunities, risks and actions identified by participants.

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

Published by: NCVO

Date: November2008

Format: PDF and Powerpoint

What is it?: A 13 page paper summarising the evidence that is available 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). A short summary of the paper is available here. Powerpoint slides to accompany the paper are available here.

All our saved links to resources about the impact of the downturn on the sector

Published by: NCVO

Date: Ongoing

Format: Web

What is it? An archive of free online resources relevant to the impact of an economic downturn on the sector, including both research reports and media articles and sources from the UK, US and other countries.

Notes from the NCVO Recession Summit on 24 November 2008

Published by: NCVO

Date: November 2008

Format: Web

What is it?: Notes from a summit at which sector leaders and government figures debated how the sector could respond to a downturn and how government and the Charity Commission could support the sector.

NCVO’s recession resources

Published by: NCVO

Date: Ongoing

Format: Web

What is it? A web page which links to all NCVO’s advice, news, policy updates and support for the VCS on how to manage in a recession.

How useful is this? A wide selection of different types of advice and information all in one place.

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.

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 as well as more questions for organisations to consider.

Last updated at 16:25 Fri 06/Aug/10.

Recent comments

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Author	Comment
2 months ago Jane	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
16 days ago Amanda	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
16 days ago 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.
14 days ago Georgina	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.