National Third Sector Trends

Exploring regional figures in relation to the size of their population is enlightening; we know that in some regions charitable organisations tend to be more numerous, but on average smaller, than in others: 

Overall, there are more charitable organisations in the more affluent areas, although more attuned analysis has shown these tend to be smaller, more self-sustaining community groups, whilst charities in poorer communities tend to be larger, more focused on tackling social need, and more likely to employ staff. 

We can see this variance between regions as well; the North East in particular has fewer TSOs per capita but is less of an outlier on other indicators compared to other regions, whilst the pattern is the inverse for the East Midlands  

Trend data indicates most organisations continue to work in partnership, but this peaked in 2019, and as opposed to rates rebounding after Covid, it is now in a downward trend. 

Within this, we see patterns if we analyse the sector by indicators like size, deprivation and spatial reach: 

• Larger organisations are most likely to be working in partnership
• Organisations in more deprived communities are more likely to be working in partnership

Those organisations with a spatial reach across one or more Local Authorities or across a region are the most likely to be working in partnership; this figure falls for national and international charities: 

Relationships between the Third Sector and the public sector are changing; trajectory over time shows that organisations still feel valued, but less informed and involved than they did in previous years: 

Instability in the environment local public sector has been operating in – changes of government, austerity, Covid and the cost of living crisis has all affected this, but it lays down a challenge for the new Civil Society Covenant to “turn the tide”

A new question this year explores the views and experiences organisations have of devolution, and whether it has been positive or negative for their interaction with the public sector. The data shows a very mixed picture; more attuned analysis indicates this is very policy-responsive, and those areas where devolution is a) more well-established and b) more political emphasis has been placed on Third Sector engagement, have more positive responses. 

We can also see an exodus from organisations bidding for or delivering contracts – even amongst the largest organisations; in fact, that is where the fall is most pronounced.

This raises big questions about what appetite the sector has to play a role in delivering government missions – and whether there is significant work to do to improve the commissioning experience and rebuild trust, in order to achieve this. 

Questions about influencing and campaigning indicate most organisations would say they “steer clear of politics”, but a substantial proportion do engage with policy-making at a local level, whilst bigger organisations tend to be the most pro-active at both “campaigning” and “lobbying” to improve policy and the life of their members and beneficiaries: 

The vast majority of organisations have more than one type of income stream, reflecting good practice is diversification to reduce risk, but overall grants remain the most important source of income across all sizes of organisation: 

Moreover, if we look at the trajectory, we can see the relative importance of contracts falling, but other sources of income including grants, is increasing: 

Exploring the age of organisations, an interesting pattern emerges about reliance on different sources of income; as organisations get older, they become less reliant on grants and contracts, whilst investment income becomes much more important: 

Most organisations report at least some part of their income coming from “earnings”; this is likely to include charging for services, such as training and expertise, or charging for room hire and use of facilities. 

The trajectory does show an increase in the proportion of organisations reporting no earned income. 

However, it is notable that organisations in the poorest areas are the most likely to have a proportion of earned income; this may be explained by the fact these organisations are often bigger and have more staff and assets and may therefore be earning income through streams like room hire and training. 

It does though give pause for thought as to whether those organisations are being forced to charge for services to those least able to afford it, in order to balance the books. 

The overall trend suggests support from business for charitable organisations, in all its forms, is falling: 

Financial support has bounced back since Covid but is still below the 2019 level. 

Nuanced analysis here however shows a fascinating picture. It is of some concern that the importance of financial support from business is falling among smaller organisations but growing among larger ones, suggesting a bigger trend towards “corporate partnerships” with support hoovered up by organisations with fundraising capacity, and who offer “quid pro quo” in terms of brand visibility for business. 

However, encouragingly, it does appear business is focusing support more in the areas it is needed; analysis by IMD shows support has fallen in wealthier areas but held steady in the most deprived neighbourhoods where it makes the most difference. 

Grants are most important to TSOs in the poorest neighbourhoods, reflecting limitations on other sources of income, and there is a direct trajectory – the more affluent the area the less important grants are. 

TST analysis of 360 Giving data about distribution of grants also shows over 54% of grants between 2019 and 2024 were made to organisations in the poorest 40% of neighbourhoods. 

Responses indicate changing relationships with grant-making bodies; in this data there is a clear “blip” from Covid, and a significant degree to which things have “returned to normal”; it does appear from the underlying trend that there is some shift towards more unrestricted and longer-term investment from grant-makers, but it won’t be possible to confirm this trend until 2028. 

There has however been a clear rebound in the expectations on charities to be “innovative”, and whilst innovation flows organically from communities, making this a “requirement” for funding can be an unhelpful distraction from the essential day-to-day work these organisations undertake. 

Overall, the sector is continuing to grow in terms of the workforce; with the continuing trend that the number of organisations that have increased their workforce, both part-time and full-time staff, exceeds the number of organisations who have seen their workforce reduce: 

However, recruitment and retention of staff is a clear challenge for the sector; organisations are more likely to report this has become harder in the last two years than report it has become easier: 

Levels of workforce development investment remain low, and concerningly, appear to have fallen since 2022; there is a critical case to make to the sector to properly invest in and support its workforce, if these challenges around recruitment and retention are to be tackled. 

Volunteers add an enormous amount of value to communities: 

However, regular volunteering has not yet fully recovered since Covid:

Despite this “slow recovery”, organisations say volunteers are more important than ever: 

This is particularly the case for smaller organisations and those who do not employ staff; larger organisations are less reliant on volunteers. 

Organisations in the most deprived communities are less likely to be heavily reliant on volunteers than those in more affluent ones, again perhaps reflecting the higher proportion of larger, staff-reliant organisations in those areas; even here though, over 80% say they rely on and could not keep going without regular volunteers.  

Over time, numbers of trustees appear to be mostly holding steady: 

However, more organisations report it is becoming harder to recruit and retain trustees than who report it is becoming easier. 

This is particularly sensitive to organisational size; the largest organisations report significantly less difficulty in this area than small and medium sized organisations.

Data trends indicate a picture of characteristics of chairs and CEOs which is very mixed; there does appear to be a reduction in the involvement of people who report having disabilities, which should be of concern, an increase in the engagement of women, but also a fall in the proportion of non-degree educated people, and falling numbers of minority ethnic chairs but an increase in minority ethnic CEOs. 

The fall in the proportion of chairs who are retired indicates a positive pipeline of younger people coming into trustee roles. 

Data shows a worrying pattern of under-investment in charities in themselves, their skills and governance, and a high level of reliance on DIY solutions to critical issues; there is also relatively low trust in infrastructure like LIOs to provide support, although this varies substantially by region: 

It’s also notable that when organisations do prioritise issues for investment, they almost always put income generation at the top of their list. Whilst it is clearly the case that financial stability and the bottom-line is of critical importance to the sector, there is a risk other vital skills and investment are being overlooked:

The sector as a whole appears to be reasonably financially resilient: 

However, it is of concern that these overall figures are masking more nuanced analysis which suggests the organisations most at financial risk are in the most deprived areas and focused on tackling key social issues like poverty. Those organisations are less likely to hold reserves, and if they do, more likely to have used them for essential costs in the last year. 

This should redouble the efforts of funders, donors and policymakers to strengthen the resilience of those critical organisations. 

In terms of actual income change, there is a clear and substantial blip for 2022 – the ‘Covid edition’, but this has rectified, and overall, it appears more organisations are seeing their income increase than fall: 

Charity leaders are broadly optimistic about the future with the vast majority believing support and resources will stay the same of increase in the next two years. 

It is notable that there is significant optimism about future income growth, particularly from charitable foundations, among the largest organisations. 

In light on the fall in engagement with delivery of public sector contracts, this finding suggests larger organisations are bullishly confident about their future but expect grant-makers and other funding sources to fill the gap left by statutory funding.

This risks putting further pressure on funders and diverting resource away from smaller, grassroots and place-based organisations, and should be a consideration particularly for grant-makers.