After Switzerland, Ukraine, Australia and New Zealand, we take a look at the UK fundraising landscape and practices with Heather Woodward, a British consultant with over 30 years’ experience in the not-for-profit sector in the UK and abroad.
What are the biggest fundraising challenges UK charities are facing?
The United Kingdom is often thought to be an attractive market for international NGOs wishing to increase their fundraising income, given its mature charitable sector and long history of providing many different types of income streams including individual and corporate giving, legacy bequests, digital platforms, grant-making trusts and foundations, popular events and sponsored challenges such as the London Marathon, Red Nose Day and the Big Give campaign.
There are several tax advantages available to UK based charities and donors who are UK taxpayers, but this favourable fiscal regime also comes with increasing legal and governance complexity. It is important to remember that the 4 countries which make up the United Kingdom of Great Britain – England, Wales, Scotland and Northern Ireland – all have separate laws and regulations with devolved parliaments and policy making, as well as their own distinct cultural and linguistic differences and regional nuances, which can add to the difficulty of navigating the administrative bureaucracy around fundraising and charity law.
Most of the larger national and international non-profit organisations are based in the capital city of London in England, and this is also where the majority of larger grant-making trusts, corporate foundations, philanthropy advisers and fundraising consultancies are to be found. But costs for residential and office accommodation, salaries and the general cost of living are significantly higher in the capital, so other cities such as Manchester in the North West of England, Edinburgh in Scotland or Cardiff in Wales are worth considering if you are looking for cheaper places to base a UK office or to employ staff or consultants cost-effectively.
One of the biggest challenges in the UK over the past few years has been the profound impact of government funding cuts hitting the charity sector at the same time as inflationary pressures and increased demand from service users facing destitution, as evidenced in the UK Poverty Report 2024-the-essential-guide-to-understanding-poverty-in-the-uk, published by the Joseph Rowntree Foundation on 23rd January 2024.
Poverty levels across countries are of course variable and perceived in different ways according to cultural norms of expected living standards, but this level of destitution in the UK might come as a surprise to some, since the UK is generally seen as an affluent country compared to many others. The problem lies in the rapidly increasing cost of living, a chronic lack of social housing and a new understanding of the growing divide between the poorest and the wealthiest, which is keenly associated with systemic inequalities based on economic, social and racial injustice. In their analysis of UK poverty, the Joseph Rowntree Foundation concluded:
“We saw from our latest Destitution in the UK report that around 3.8 million people experienced destitution (where they could not afford to meet their most basic physical needs to stay warm, dry, clean and fed) in 2022. This included around one million children. These figures have more than doubled since 2017. There is further evidence of deepening poverty in the increasing number of people using food banks, with more emergency food parcels being delivered by the Trussell Trust network than ever before.”
UK fundraisers have been experiencing an unprecedented level of competition for trust and foundation grants. Some of this is generated by the increasing use of AI (artificial intelligence) to help write more applications at a faster pace, but also by a significant reduction in government funding for local government, public sector and charity contracts.
Where once funders were able to accept 1 out of every 3 – 6 applications received, now the number is said to be around 1 in 25 – 30.
Many trusts and foundations have been working to adapt in response to these changes, suspending their applications due to excessive demand while they moved from paper-based to online application systems and towards narrower eligibility criteria and lower thresholds for annual income. There have been growing demands from charities for more unrestricted, longer-term giving (3-5 years instead of 1 year projects) and a noticeable shift towards seeking full cost recovery to help pay for the essential core costs such as salaries and overheads which keep charities going.
More progressive funders are increasingly moving towards trust-based philanthropy and social impact investment, with a greater focus on unrestricted and longer-term grant-making through carefully selected partner charities. Some funders closed to applications while their trustees and staff engaged in strategic review to consider the wider issues of how to optimize their philanthropic impact to respond to demands for greater equity, diversity and inclusion (EDI) and the decolonization of the charity sector.
In an announcement that caused ripples of shock across UK fundraisers in July 2023, Lankelly Chase – one of the largest funders in the UK with investments valued at £138 million in March 2022 – decided to make reparations for their colonial connections to the slave trade and are currently aiming to spend out all their endowment capital over the next 5 years by redistributing the wealth among selected partner organisations led by Black and Minority Ethnic groups. It will be interesting to see further developments unfold during the coming years as many funders consider whether they can use their capital endowments for greater impact towards social justice and environmental goals.
Despite the growing understanding of social and racial injustice in the UK, thinking around immigration and global poverty is increasingly polarised. Overseas and disaster relief causes in particular have suffered a marked downturn in income since the combined effects of Brexit, the Covid-19 pandemic, the conflict in Ukraine and the subsequent inflationary pressures of the cost-of-living crisis.
UK Overseas Development Assistance (ODA) from the British Government has been severely curtailed in the past few years due to changes in government policy, with the total spend reduced from 0.7% to around 0.5% of UK GNI (Gross National Income) since 2020. According to UK Government Statistics on International Development (SID) 2022, the final spend on ODA was £12.79 billion, which represented a 12% increase of £1.37 million on the 2021 total. However, £3.69 billion of this amount intended for aid overseas was actually given in the form of “in-donor refugee costs” – a term used to describe funding spent on refugees and people seeking asylum in the receiving country, i.e. in the UK. This accounted for 28.8% of UK total ODA in 2022 and attracted widespread criticism of this loss of funds to global aid overseas.
The provisional UK ODA figures for last year, which have recently been released in UK Government Statistics on International Development (SID) 2023, indicate that the total UK ODA spend increased to £15.37 billion (0.58% of UK gross national income) in 2023. However, the figures also revealed that UK aid spending on ‘in-donor refugee costs’ had increased again, from £3.7bn in 2022 to £4.3bn in 2023, which means that over 25% of the whole ODA budget is still being spent inside the UK.
What are the individual giving trends in the UK?
Looking at individual donations from the general public in the whole of the UK, the Charities Aid Foundation (CAF) has produced a regular Giving Report for the past 20 years which helps to understand individual giving trends. According to their UK Giving Report 2023, these are some of the recent trends, drawn from a representative sample of over 13,000 people across the UK:
- The British public donated an estimated £13.9 billion in 2023.
- This figure was up from £12.7 billion donated in 2022, but the increase was due to some donors making bigger donations, not by a larger number of people giving to a charitable cause.
- Giving to overseas aid and disaster relief reduced by 50% in 2023, a loss of £800 million compared to 2022.
- 75% of adults participated in at least one charitable activity during the year
- 58% donated or sponsored at least once in the year.
- The typical monthly donation in 2023 was £20 and this figure has remained unchanged for the 7th year in a row – meaning that it has not kept up with inflation which has increased significantly in the UK during this period.
- 75% of donations are £50 or less
- 90% of donations are under £100.
- Giving a donation of £500 or more to a single charity would put an individual donor in the top 1% of UK givers.
This report also highlights an enthusiastic return to fundraising events such as sponsored marathons, swims and cycle rides during 2023, as well as classic British fundraisers such as car boot sales, pub quizzes, fish and chip suppers, charity auctions and local fairs. Events that have a fun and social element, especially those that can be organized in teams, are said to be most in demand post-pandemic and these are generally well supported by the British public as part of community life in the UK.
Many high street banks have closed their branches in smaller towns since the pandemic, largely due to cost-cutting measures and increased take-up of online and mobile banking. Contactless giving solutions via bank cards or by bank transfers direct to charities’ accounts have become much more common since the pandemic forced everyone online. Digital fundraising platforms such as JustGiving and GoFundMe are increasingly popular in the UK and are widely used across most age groups now, but are generally less popular with older donors over 55, many of whom still prefer the traditional methods of giving by cash or cheque.
What should I be mindful of when raising income in the UK?
Increasing regulation and reporting requirements
Anyone aiming to raise funds in the UK must be mindful of the fact that charitable work and giving is strictly regulated by independent government-appointed Charity Commissions, which aim to assist trustees in running their charities for public benefit and according to good governance principles. These Charity Commissions are tasked with actively investigating complaints and serious incidents and if necessary legally prosecuting charities and individual trustees who do not act with sufficient care and attention to the regulations.
Charities based in the UK are required by law to register with the relevant Charity Commission if their income is over £5,000 per annum. They are also required to complete an Annual Return and upload this to the relevant Charity Commission Register, declaring their income and expenditure for the previous financial year.
If they have income over £25,000 a year, there is an additional legal requirement to file a trustees’ annual report and accounts, which includes more detailed financial statements that should be prepared according to the Charities SORP (Statement of Recommended Practice) 2019. The Charities SORP sets out the expected accounting practices and use of transparent accounting notes with specific information aimed at standardizing financial reporting across the charity sector. Larger charities are also required to have independent reviews of their accounts or full audits, depending on the size of their income.
All charities must also adhere to UK data protection legislation which is regulated and enforced by the ICO – Information Commissioner’s Office. This can make the transfer of data across borders much more difficult and usually requires specialist advice and expertise.
This focus on transparent and rigorous data collection and reporting in the UK, although it adds an administrative and accounting burden for charities over £25,000 income, provides a rich source of information on all types of charities in the UK. The Charity Commission websites also provide detailed guidance on charity governance and the careful stewardship of charity funds and policies.
The largest non-profit regulator in the UK is the Charity Commission for England and Wales, which currently regulates over 170,000 charities with a total gross income of over £87.5 billion and total expenditure of just over £97 billion, as recorded in the Sector Data Overview, which is updated daily with data received from annual returns and reports.
The Office of the Scottish Charity Regulator (OSCR) performs a similar function in Scotland, regulating a total income of around £15.5 billion from just over 25,000 Scottish registered charities in 2023.
In Northern Ireland, the independent regulatory body is the Charity Commission for Northern Ireland, which regulates over 7,200 charities in Northern Ireland.
Most UK charities also aim to be registered with the UK Fundraising Regulator so that they can demonstrate robust governance around public donations and display the distinctive FR logo on their website and fundraising communications, which acts as a reassurance to donors and grant-makers. This shows a formal commitment to the UK Code of Fundraising Practice, which sets out the legal standards and guidelines for good practice that apply to all fundraising methods carried out by charitable institutions and third party fundraisers registered in the UK.
This is a work in progress as trustees govern as unpaid volunteers in the UK and charities do not always manage to meet the required standards, but it reflects the high expectations of good charity governance and robust practice around fundraising, finance, operational and HR matters. Consequently, anyone seeking to raise funds in the UK will need to invest time, money and effort in training, as well as researching the various regulations and potential income streams, in order to become familiar with the complexities of charity law and good governance pertaining to each fundraising method.
It may seem very onerous or unnecessary to those who come from countries where there is less non-profit regulation, but understanding this aspect of the UK charity sector is absolutely essential for securing funds from UK sources and engaging with consultants and partnership opportunities in a professional manner.
Tax reliefs through the UK Gift Aid scheme
On the plus side, the UK has generous tax reliefs designed to support charities, such as corporation tax relief, business rates relief, and a tax-efficient giving scheme called “Gift Aid”, which allows UK based charities registered with the scheme to claim back 25p on every £1 donated by a UK tax payer. So with a Gift Aid Declaration, a UK taxpayer’s donation of £100 will mean actual income of £125 to a charity.
UK taxpayers can also set their total Gift Aid donations against their taxable income to receive a personal tax allowance or deduction each financial year, which is a strong incentive towards establishing regular monthly or quarterly donations. The Gift Aid scheme is regulated by the UK tax office – the HMRC (His Majesty’s Revenue and Customs). It is quite time-consuming to set up and track donations via Gift Aid declarations and quarterly submissions to the HMRC, but well worth the effort as payments can usually be backdated 4 years and only one Gift Aid declaration per donor is needed to cover all future gifts.
Recommendations for effective fundraising in the UK
Larger and well-established nonprofits who are able to set up a UK registered charity may wish to consider this option, but it is certainly a difficult operating environment at present and likely to require a very significant start-up investment as well as a solid track record of impact and good governance. It is increasingly difficult to obtain visas for foreign staff, so UK based staff or consultants with relevant fundraising experience, networking contacts and knowledge of the legal and financial framework of UK regulations will also be required.
Opportunities for collaborations and partnerships, especially in the fields of development research and medical care, may present an easier option. Funding calls and further details of who is funding what can be found via the UK Collaborative on Development Research (UKCDR). This is an organisation that works across various government departments and research funders to co-ordinate the UK’s international development sector and improve the impact of international development research.
Bond provides support and networking for over 400 civil society organisations based in the UK, with the aim of eradicating global poverty, inequality and injustice. They link with 13 other networks and partners and form part of the UK Alliance of National Networks for International Development, which includes the national networks of Scotland (Scotland’s International Development Alliance), Wales (Hub Cymru Africa) and Northern Ireland (CADA). See a list of all their networks on their website.
If you are not familiar with fundraising in the UK, a good starting point would be some free desk research via websites such as Charity Excellence Framework , the NCVO (National Council for Voluntary Organisations) or the Charity Commission Register.
You could also attend online fundraising courses and training webinars such as those offered by the Chartered Institute of Fundraising or the The Directory of Social Change (DSC), which provide many online sources of funding as well as books and further resources to assist with income generation.
Engaging an experienced fundraising consultancy would also be helpful in navigating the complexity of the UK fundraising ecosystem, creating a solid plan of action and avoiding some of the potential pitfalls.
Heather Woodward is a British charity consultant with over 30 years’ experience in the UK and international non-profit sector. She is currently working with a charity in Manchester to support their trusts and foundations fundraising. She is also a CELTA qualified tutor of English as a foreign language, specialising in online. To connect with Heather click here.
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