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The funding landscape for churches and charities

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The funding landscape for churches and charities

In this blog, Helen Gray, Benefact Trust Director, shares her insights on the current funding landscape and how organisations can navigate the challenges and seize new opportunities.
Every day, we see first-hand the crucial role churches and charities play in supporting our communities. They provide vital services, bring communities together and address major social issues. They do incredible work, but their ability to make a difference relies heavily on funding and donations from individuals, businesses, government bodies and grant funders like us. 
 
The funding landscape has changed dramatically over the past three years and has been significantly impacted by the Covid-19 pandemic and the current cost of living crisis. According to the Charity Commission, a staggering 60% of charities saw a loss of income as a result of the pandemic and Benefact Group’s Value of Giving report estimates that charitable donations were down £5bn in 2022, from 2021’s £9.3bn – most likely due to the rising cost of living.
 
It’s important to recognise the huge funding challenges churches and charities are facing right now, but we also want to highlight the new opportunities that have been forged through this hardship, and the possibility of a brighter future on the horizon.
 
The impact of Covid-19 on fundraising 
 
The outbreak of Covid-19 left churches and charities in unchartered territory. As the world endured multiple lockdowns, restrictions and economic uncertainty, funders faced their own challenges. Should they dip into their endowment funds to meet immediate need, potentially at the cost of eroding capital value, or should they be cautious and consider the longer-term needs of their beneficiaries?
 
Social distancing and lockdown meant charities had to cancel fundraising events which led to a drop in engagement and revenue. The pandemic also put pressure on charities to redirect their efforts and resources to help people in immediate need. This was a credit to their adaptability and dedication to supporting lives, but it also meant that crucial projects were left underfunded and postponed. 
 
Churches also had to make huge changes, moving to virtual worship and fundraising. While some embraced digital giving with enthusiasm, understandably other churches struggled to adapt to this new way of working; lacking resources and digital expertise. This was evident in our 2020 Covid-19 survey, which revealed that 32% of churches were concerned about a lack of resources and a further 20% reported a lack of digital knowledge as a barrier to connecting with the community. 
 
We needed, and wanted, to step in as a funder and launched our Hope Beyond grants programme to help equip churches and charities to adapt to these new challenges and support people in crisis. We awarded over £5m in grants to more than 700 organisations to help build their digital resilience, tackle loneliness and isolation, and improve mental health and wellbeing in their communities. In the wider funding community, ACF’s 2022 research report also showed that the Top 300 Foundations stepped in to increase their giving by 13% from 2020 to 2021.
 
How the cost of living crisis is affecting giving
 
The cost of living crisis, characterised by soaring inflation rates, housing costs, and stagnating wages, has further exacerbated funding issues for churches and charities. The rising cost of living has left people with less disposable income, reducing their ability to donate regularly. 
 
Corporate donations have been a considerable source of funding for many organisations. However, economic uncertainties have made some businesses cautious about their spending and social responsibility initiatives. Unfortunately, in times of financial strain, corporate giving can often take a backseat. In a recent article, UK Fundraising reports that corporate giving has dropped by a quarter in a decade.
 
Our specialist group of financial services businesses, Benefact Group, recognises the importance of sustained and regular giving and donates over £1million to charities and good causes each year through its Movement for Good Awards. The Group is the third-largest corporate donor to charity in the UK.

An increase in demand for charitable support
 
The irony is that when churches and charities are facing their toughest times yet, the need for their support has never been more vital. According to the CAF Charity Landscape Report for 2022, 75% of charity leaders said that demand for their services increased over the first year of the pandemic, and 86% believe demand will continue to increase. From foodbanks to debt services and mental health support, these organisations have seen a surge in the number of individuals seeking their help. Meeting this increased demand while facing fundraising challenges has stretched their resources to capacity. 
 
Since the pandemic began, the debt advice charity Crosslight Advice has reported a 63% increase in the number of people accessing their support due to mounting debt. This number will keep growing as their clients fight to afford rent, food, and bills. 
 
Bruce Connell, Founder and Chief Executive of Crosslight Advice, said: “One of the scariest feelings imaginable is the realisation that you can’t afford to eat or feed your children properly – almost half of those who seek our help have had to go without food. We see day in day out the devastating effect that the cost of living crisis is having on those in need, and it’s the most vulnerable that are affected the most. We are supporting over 20% more clients than we were this time last year. Nearly two thirds of those we support have had to miss bill payments and over 40% have fallen behind on their rent. We long for our communities to flourish and for no one to be left behind, and our teams work tirelessly to support individuals and families in need and help them get back on their feet.”

The future of funding for churches and charities

Yes, there are hurdles to overcome, but the future is not all doom and gloom for churches and charities. The pandemic and cost of living crisis have brought about challenges, but they’ve also brought with them new opportunities to diversify and flourish. There are several trends and strategies that can shape a more picturesque funding landscape:
 
• Embracing digital fundraising - With advancements in technology and an increase in flexible giving and cashless transactions, churches and charities have new opportunities to leverage digital fundraising platforms. Embracing user-friendly platforms and focusing on social media campaigns and online events can help reach a wider funder base, especially younger tech-savvy audiences. UK Fundraising reports that Gen Z have donated the most in the first part of 2023 through social media platforms such as TikTok and Snapchat.
 
Collaborations and partnerships - Churches and charities can explore collaborations and partnerships with other like-minded organisations to pool together resources and expand their reach and impact. Working together can enhance efficiency and create innovative solutions to shared problems. 
 
Grant funding - Churches and charities should proactively identify grant funding opportunities and develop engaging applications that fit the criteria of the programmes. Anyone looking for help applying for a grant can read our top tips on applying for a grant
 
Diversification of funding sources - Relying on a single funding stream can be a risky business. Churches and charities should diversify their income sources to include individuals, corporates, grants, and legacy giving. This way they have funding to fall back on when times are hard.
 
Legacy giving – According to Civil Society, the legacy market is forecast to grow to £5.16bn by 2030 as a result of the largest ever intergenerational transfer of wealth from baby boomers to their children and grandchildren. Focusing efforts on developing a robust legacy giving programme today will pay dividends in the future.
 
Planning ahead – If the past few years have taught us anything, it’s that you can’t predict what the future holds. However, you can plan for it. Churches and charities should think about the longer-term financial landscape so that they are prepared for whatever challenges come their way.
 
Increased focus on impact reporting - Demonstrating the tangible impact of their work is vital for building trust with funders and securing long-term support. Investing in robust impact reporting can lead to increased confidence among supporters and potential funders. We’re focusing more on the impact of our grants. More information and impact reporting guidance can be found on our Advice and Resources Hub
 
The funding landscape for churches and charities has faced major challenges over the past few years and has undoubtably changed forever. However, by adapting, collaborating, and modernising, these organisations will be better equipped to navigate this new terrain. And despite the hardships, the dedication churches and charities have to their causes and the support they provide to communities will continue to drive their resilience.
Photograph of Helen Gray

Helen Gray

Benefact Trust Director

The funding landscape for churches and charities has faced major challenges over the past few years and has undoubtably changed forever. However, by adapting, collaborating, and modernising, these organisations will be better equipped to navigate this new terrain.
Helen Gray

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Benefact Group's work

As a Trust, our ability to support and fund so many worthwhile causes, is made possible by the hard work of the award-winning specialist financial businesses that make up Benefact Group – which gives all its available profits to the Trust, sustaining our giving. As a part of the Benefact Group each business, whether it be in specialist insurance, investment management, broking or advisory shares the Trust’s ethos of giving back.