The Charity Commission annual return provides a comprehensive set of data on the charity sector in England and Wales. All registered charities must file an annual return, although the rules vary depending on the charity's size and structure.
The Charity Commission has recently published the information gathered from the annual returns submitted for financial years ending in 2023. In 2024, 108,759 charities were required to submit their annual return and 101,494 did so by the end of the year.
Whilst the analysis shows the increased societal impact of the sector, it highlights some underlining concerns about the financial resilience of many charities.
Income and expenditure
The total income received by charities has increased by nearly 7% since last year, to over £96 billion. Total spending has increased by almost 10%, with £95.73 billion spent on delivering charitable aims. The gap between income and spending is the smallest margin it has been in five years at £0.7 billion, down from £2.9 billion in 2022.
- More than 50% of charities had more income than expenditure, indicating a level of financial resilience. However, around 40% of charities' spending exceeded their income, indicating unsustainable operations. These charities will have limited scope for investing in long term projects and without high levels of reserves, may have to close down if this continues year on year.
- Around 50% of charity income came from charitable activities, a third from donations and legacies, and less than 10% from trading activities. Around 5% came from investments (including owning premises).
- Charities received donations and legacies totalling £31.4 billion. Charities in income bands under £500,000 had the greatest proportion of their income from this source. Almost half of charities with an income of £100k or more reported donations from a corporate donor.
- Under 3% of annual return submissions were for charities with an income of £5 million or more. These charities had a total income of £72.6 billion, representing over three quarters of the total income in the sector. These charities had a total spending of £71.6 billion, which represented a similar proportion of the sector's total spending.
- Only charities with an income of £500,000 or more are asked to provide a breakdown of their expenditure in the Annual Return. These charities were asked to provide figures for their expenditure on 'charitable activities', 'raising funds' and 'other'. Of these charities, less than 9% of what was spent on charitable activities was spent on fundraising, amounting to £8.48 for every £100 spent.
- Income from charitable activities totalled £46.68 billion, representing almost half of all charity income. Charities with income of more than £500,000 received the most income from charitable activities, ranging between 40% to 50% of income. Under 20% of charities reported receiving a government grant, with fewer reporting government support than in the previous year.
Funds and reserves
Only charities with an income of £500,000 or more were asked about their funds and reserves. Of these charities, around 13% reported having a fund. The average amount held was £18.8 million per charity. Unrestricted funds were more common (representing nearly 60% of funds reported). Endowment funds represented just under a third, and restricted funds around 10%.
Charity reserves have stayed broadly level from last year at around £75 billion.
While some charities have been able to build up their reserves (eg if investments have performed well), others reported drawing their reserves. Those charities drawing on their reserves included those whose income was impacted by the Covid-19 pandemic in the preceding years.
Staff and volunteers
All charities were asked for information about employee numbers for the first time in this Annual Return to enable a better understanding of the labour market in the sector. Under 50% of charities had paid staff (working under permanent or fixed term contracts, or self-employed), totalling 1.8 million people across nearly 50,000 charities, averaging 36 people per charity.
The majority of employees worked in the UK with only around 5% of charity employees working overseas. The charities employing people outside the UK were mainly the charities with the highest incomes.
Just under half of charities reported having paid workers of some contract type while a greater proportion (around 70%) reported having volunteers.
The data highlights the importance of volunteers to the charity sector. Volunteers outnumber paid workers over 3 to 1, and the total number of volunteers continues to increase.
Other
5% of charities reported having trading subsidiaries. Larger charities are more likely to have a trading subsidiary, with 57% of these charities having an income of £1 million or above.
Less than 10% of charities reported offering any trustee benefits, and of those benefits, the least common benefit was being paid for being a trustee.
Conclusions
The Charity Commission's Chief Executive David Holdsworth has said this data 'shows the sector is not just delivering life-changing impact across communities but that it is an economic powerhouse for the economy, spending almost £96 billion a year on delivering charitable purposes.' He also noted that whilst 'the cost of living crisis has applied significant pressure on charity finances ...it also shows charities rising to the challenge, spending almost ten per cent more in 2023 than in 2022 to meet increased need.'
This report follows recent data published by the Charity Commission which indicated increased demand for charities' services, with 9% of people stating they had received food, medical or financial support from charities, compared to only 3% five years ago.
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