Are Charities Approaching A ‘Cost Of Giving Crisis’?

As we enter a cost of living crisis in the UK (where living is becoming more expensive due to inflation rates rising and wages not), we face a very real risk that people will stop giving to charity. Indeed, in the charity sector we could face a ‘Cost of Giving Crisis’.

How likely is a Cost of Giving Crisis?

Let’s first take a look back at previous recessions. I did a bit of reading on economics in the 1980s and 1990s (my Dad – an economist – would have been proud of me that evening). It seems that the amount that people were prepared to donate did fluctuate in line with the state of the economy. When the economy was booming, there would be a notable increase in the amount that people were donating. Yet surprisingly, when the economy took a downturn (notably in the early 1980s and early 90s), the change in the amount people were donating, wasn’t actually all that significant (Cowley et al 2011).

So, from my initial research, ‘giving’ in the UK appeared to be recession- proof? Awesome. I guess we’ve got nothing to worry about then…

Hmmm. Then I looked at more recent recessions. When looking at what happened during the global financial crisis of 2007-2009 there was a clear (albeit small) drop in nominal donations in the UK. It’s been suggested and backed by research (by Finsman et al, 2015) that people were significantly more altruistic before the economic slump. Not a massive surprise really – when people have less they become more selfish, or perhaps a better way of phrasing it would be that they choose to protect themselves and their immediate family before helping others. But this behaviour does seem a bit different to the patterns we were seeing in the 90s.

So we’ve got a bit of a mixed picture, meaning we can probably conclude that recessions don’t necessarily equal a reduction in charity donations. But they do sometimes. Helpful. Bear with me.

How do people feel about donating during a cost of living crisis?

Given my inconclusive research, I figured I’d just ask people what they’re planning to do. Despite my better judgement and having always hated LinkedIn polls with a passion (mainly because my LinkedIn feed was full of pointless polls for a while – and frankly I couldn’t give a wotsits arse what time you start work in the morning or which foot flips and which foot flops – yep a genuine LinkedIn poll), I decided to break my own rules. I know. Rebel.

I set up a LinkedIn poll asking my network whether they would continue to give to charity when the going gets tough?

The result of my very unscientific (and probably not representative of the UK population) LinkedIn poll (which received a whopping 88 votes!) indicates that as many as 34% of existing donors are planning to reduce the amount they give to charity in the coming months, and 6% are going to stop donating at all.

Ouch. That’s a huge hit on any charity that’s reliant on donations.

Now it’s possible that there’s a gap between what people say and what people actually do. But let’s be honest, we all want to be seen to be generous, so if anything the reality could actually be worse than the poll suggests (we all (alright most of us) want to give, but will we actually?)

Anyway, we probably shouldn’t base any strategic decisions on the results of a LinkedIn poll. So let’s look at what the professionals are saying.

What do current donation patterns tell us about giving habits?

Far more scientific, but less up-to-date research from the Charities Aid Foundation (CAF) in 2021 suggested that 14% of the UK population would cut back on charitable donations to help manage their rising bills.

The reality, according to the CAF is that we’re already seeing fewer people give to charity. In April of this year for example, 2 million fewer people gave to charity than in March.

In fact, when we look at the value of donations in real terms (i.e. as a share of GDP) there’s been a steady decline since 2010. By 2021, donations as a share of GDP were at 0.48% compared to 0.68% in 2005.

So if the number of households giving to charity are in long-term decline, and we’ve previously seen people become less altruistic at times of economic uncertainty, and a significant number of  people are actively saying that they’re likely to cut back on giving as a result of the rising cost of living, it seems fairly likely that the charity sector could well be heading towards a “cost of giving crisis”.

Add to this the fact that the demand for services provided by charities is likely to increase, whilst rising inflation means that in real terms money doesn’t stretch as far so donations will be worth less, and we have a bit of a perfect storm on our hands: fewer donations means reduced income for charities whilst their costs (along with everyone else’s) will continue to rise.

There’s still some hope for charities

There’s one nugget of information that I’m clinging on to for dear hope; there are some signs that the very richest people (who are unlikely to be affected by the cost of living crisis), are stepping up their donations. CAF said that large donations (between £25k and £100m) rose by 26% between 2020 and 2021. Indeed if the rich increased donations to 1%, the sector could get an additional £1.4bn in annual income, (according to The Giving List by the Sunday Times).

So we’ve got a glimmer of hope amongst an otherwise fairly gloomy outlook.

So what should charities do to survive the pending Cost of Giving Crisis?

“People will forget what you said. People will forget what you did. But people will never forget how you made them feel.”

Maya Angelou

1. Don’t put all your eggs in one basket

If your charity is reliant on individual giving, think about how you can capitalise on other opportunities – whether it’s trusts, legacies, ecommerce or ticket sales. There’s more than one way to make money. Make sure you’re not too reliant on a single income stream.

2. Communicate honestly and authentically to build trust

This starts with your internal processes. For people to trust you with their money when they don’t have much of it themselves, they need to know that every penny they give is going to work as hard as possible for your cause.

That means efficient processes, minimal travel costs, using your resources wisely (that’s code for not having your entire organisation in meetings for 80% of their working week), making investments that will bring a return, and ultimately eliminating wastage of spend. Efficiency is the name of the game here. And how you communicate that efficiency to audiences will be key to give them confidence that what they’re giving is going to go directly to helping your cause.

3. Deepen your connections with your audiences

Ever known someone who’s bought something they don’t really need, just because they love it!? Of course you have. You’ve probably even made purchases because of  the way a product made you feel.

The same is true of donations. More often than not people give with their hearts rather than their heads – that is they make the decision to give because they feel connected to the charity – because they heard a story that made them feel sad or angry or joyful – because they feel empathy.

You need people to feel deeply connected to your cause if they are to continue to give. So make sure your communications make them feel something. Regular communications and brilliant story-telling are going to be even more important than ever.

4. Rethink what it means to ‘Give’

If you’ve done the above two points well, people will want to give. But for some, giving a monetary donation simply won’t be an option. But that doesn’t mean they can’t ‘give’.

Think about what will be truly valuable for your charity. You might want people to give their time, their expertise, or even their opinions. Perhaps even allowing people to help shape the direction of the charity.

Think about what value really means to you – and then make it easy for your supporters to give in ways that truly add value.

5. And if you want to thrive, not just survive…

Read my article (coming soon) on how to communicate during a cost of living crisis.

There’s no doubt that there’s a rocky road ahead. The coming  months (and potentially years) are going to be tough. But I look back with fondness at how the charity sector responded to the pandemic in 2020 (the resilience, the pivots, the innovation, the creativity) and I know in my heart, that we’ll all be just fine.