Squeezed funding, programme cuts and redundancies: NGOs struggle without government support

Small and medium NGOs are being hit worse by the financial ramifications of Covid-19 and UK government cuts, according to our latest survey of Bond members.

In the year ahead, 58% of small organisations and 54% of medium organisations expect their income to fall, compared to 40% of large organisations. Many also face further redundancies and cuts in 2021-22.

Despite the many examples of NGOs stepping up to support the world’s most marginalised during the Covid-19 crisis, many organisations haven’t been able to access government support and will have to make programme cuts.

Exactly 100 organisations of all sizes responded to the survey between 11-18 January 2021. Here are the most concerning findings for NGOs and the marginalised communities they serve.

A long road of financial difficulties ahead

Nearly three quarters of organisations have taken financial knocks. However, more small (79%) and medium organisations (70%) have been affected compared to large organisations (60%).

The financial ramifications of the crisis are forecast to last longer for medium and small organisations. 46% of medium organisations and 40% of small organisations expect it to take 12-24 months to return to their pre-crisis income levels, compared to 27% of large organisations.

In addition, 15% of respondents don’t know if they will ever return to their pre-crisis income levels.

As income drops, demand for services goes up

As communities grapple with the Covid-19 crisis, organisations are seeing an increased need for their services and programmes, including healthcare, water and sanitation, food and humanitarian relief.

63% of organisations expect demand for their services to increase in 2021-22. Of those organisations:

• 29% predict an extra 20% demand for their services in 2021-22
• 12% expect a further 40% demand in 2021-22.

Medium (32%) and small (30%) organisations are most worried about the growing needs of marginalised communities, compared to 20% of large organisations.

Staff furloughed, but redundancies still loom

As seen in our earlier surveys, most organisations are unable to access the UK’s furlough scheme.

Smaller organisations are less likely to use the scheme: only 21% currently furloughing staff, compared with 41% of medium and 40% of large organisations. 21% of large organisations have furloughed at least 10% of their staff.

Despite the furlough scheme, 26% of organisations have made staff redundant and 34% are planning further redundancies in 2021-22. 9% of organisations have cut at least a fifth of their staff and 7% will be making at least a fifth redundant in 2021-22. Some face shedding over half of their staff
Administration, finance, programme and delivery roles are most at risk, as organisations face closure or scale back programmes.

Larger and medium organisations are more likely to have already made staff redundant. 33% of large and 32% of medium organisations have already made staff redundant, compared to 19% of small ones.

In the year ahead, more smaller organisations will be burdened by staff reductions:

• 46% of medium organisations will cut staff in 2021-22, compared to 32% that have already made redundancies.
• 29% of small organisations will cut staff in 2021-22, compared to 19% that have already made redundancies.

Programmes scaled back, while NGOs face closure

8% of the respondents reported that their organisations “may need to close”. Half of these organisations said their income from government grants and contracts had been compromised. If the findings are applied across the whole of the Bond membership, this figure translates to 35 organisations closing.

12% of organisations are being forced to reduce the number of countries they work in. Two thirds of these have had income from government grants affected in some way. Again, replicated across the full Bond membership, this figure would see over 50 organisations exiting from countries.

Funding sources under threat

All of NGOs’ usual income streams have been hurt by the crisis.

The income stream most badly hit is public fundraising, which includes events, marathons and charity shops. 81% of those who usually raise this kind of money say their public fundraising has been seriously or very seriously affected.

Many organisations have also suffered from cuts in UK government funding. 39% of those who receive government grants said their funding has been seriously or very seriously affected. Similarly, 42% who receive government contracts have had their funding seriously or very seriously impacted. 23% of organisations funded by trusts and foundations have seriously or very seriously reduced funding.

Perhaps surprisingly, individual giving from the public has held up the strongest, with only 14% of organisations reporting significant decline.

Inadequate government support

We asked organisations to rate the government’s Covid-19 funding and support from 1 to 10. Their scores are:

• 3.6 out of 10 for the overall UK government’s support to the UK charity sector.
• 2.6 out of 10 for the (then) Department for International Development and (now) Foreign, Commonwealth and Development Office support to international NGOs. 41% of organisations gave the lowest score of 1.

Smaller NGOs could lose out, as government moves towards contracts over grants

Despite the government’s increased use of contracts rather than grants to fund organisations, only 42% of respondents get contracts compared to 77% who receive grants.

65% of small organisations receive grants, while only 31% are able to access contracts. We may see smaller and medium organisations losing out on future opportunities for government funding.