Is fundraising f***ked?

Joe Saxton reports on the future of fundraising and funding through the lenses of political, economic, social and technological factors

We are publishing a new report in early 2018 looking at the political, economic, social, technological and other factors that impact on charities. This blog looks specifically at some of the factors that are going to impact on fundraising and funding. Be warned, it’s pretty gloomy reading. If there is light, there is also a lot of tunnel!

 

Government funding down, and no sign of improvement

Charities have seen their income squeezed by the fall in government expenditure, and the switch from grants to contracts of what income there is left, has made life doubly hard for many charities. While there is talk of austerity not being quite as tight as previously, this will mostly go into pay increases, the NHS and social care. There is little prospect of a return to the heyday of the Blair years for charity income.

 

Real incomes are going to be squeezed for the next decade or more

The Institute of Fiscal Studies suggests that for the next decade or more earnings are going to be squeezed, by high inflation and low wage growth, and that wages have been squeezed for the last decade since the financial crash. In other words, those in work are going to get poorer relatively year on year. Average earnings are going to be £1,400 a year lower in 2021 than forecast, as recently as 2016. And that’s not good if we want to raise money from those people.

 

Millennials squeezed by debt, low incomes and more debt

One particular group under pressure is the Millennials (roughly those under 35). This is because many enter the work place with high debts from university (now averaging £50,000 on graduation with interest rates of 6%) and as we have already mentioned earnings growth is under pressure. House prices have risen dramatically over the last twenty years, especially in London, so our home-owning democracy is looking a lot more shaky.

 

Self-regulation makes things tighter

The Codes of Practice from the Fundraising Regulator are being re-written bit by bit. I think it’s fair to say that a revision in the current climate is likely only to make fundraising a bit harder, and a bit more bureaucratic. Some of this is well overdue, but every little hurts, as they don’t say at Tesco’s.

 

GDPR reduces database sizes

Although the wisdom on best practice for GDPR seems to change month by month, anything which requires donors to opt-in (or even opt-out) will reduce the number of supporters available to fundraise from. Some communication channels are more vulnerable than others – telephone fundraising seems to get opt-in rates as low as single figure percentages. Fundraising from individuals looks likely to be a shadow of its former self over the next decade.

 

Online giving proving hard to get lift off

Of course, GDPR doesn’t just affect charities; all organisations are affected. But charities are uniquely vulnerable. Our recent report ‘Ad Infinitum 2’ showed that while half of all UK advertising expenditure is now online, just 5% of advertising by charities is spent online; and mail and door-drops are the biggest category by far. So while the commercial world has migrated to advertising which is less vulnerable to opt-in, charities haven’t. Indeed, charities have found it very hard to make online fundraising work well for them outside of events and disasters.

 

Technology allows everybody to be a fundraiser

We saw in the Grenfell tragedy and the recent terrorist attacks how fundraising appeals can set up in a moment, and thousands raised in a matter of days, even hours. This is good, but what is less good is that the scope for fraud is huge, and some of those who set up the appeals have no idea how to spend the money well. This disintermediation, where the charity as trusted intermediary is removed, has significant challenges for charities, and threatens the trust of the public that their donations are well spent.

 

Less and less cash for tin collecting

The amount of cash used in transactions is predicted to drop from 45% in 2015 to 27% in 2025. Contactless cards have allowed people to do without cash: one colleague at nfpSynergy hasn’t carried any for 3 weeks. So, where there is less cash, there is less for tin-rattling and house-to-house collections. Encouragingly, some tests of collecting with contactless devices indicate that the average donation doubles (from around £1 to around £2).

 

Cheques are almost an endangered species

If cash is getting scarce, cheques are even scarcer. Ask yourself how many cheques you have written in the last year? But for many charity donors they remain a preferred way of giving. Expect another attempt to get rid of cheques in the next five years and an increase in their costs: bad luck charities and small businesses.

 

Where next for charity funding?

Charities need their income ideally to be predictable, un-restricted, low-cost, and tax-effective. As a rule, it’s better if it comes in day in, day out rather than because of exceptional events like disasters, telethons, or big events. Direct debits are the perfect form of income in many ways. One decision to sign up to a direct debit can provide a decade or more of income for a charity.

Unfortunately, the most visible campaigns at the moment, ‘Giving Tuesday’ and the ‘Big Give’ campaign, fit none of these criteria. We don’t want people giving on one day of the year, but 365 of them. We need people to give even when their income isn’t doubled, when it’s trending on twitter, or only when a disaster is in the news.

It’s not clear who is putting their energy into how we create a rosier future for fundraising and charity funding streams. However next week’s blog will focus on the good news in the external environment and how and what charities might be able to do to harness it. So, is fundraising f***ked? – we leave that answer till next week.

Joe Saxton

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