Skip the primary navigation if you do not want to read it as the next section.
Skip the main content if you do not want to read it as the next section.
In evaluating a commercial investment opportunity, understanding the company's business environment is an important step towards understanding the company itself. Making charitable investments is no different. As you learn more about the causes and charities you wish to support, you will also want to understand and appreciate the environment in which they operate. To provide some context, this section1 offers a brief introduction to the characteristics and challenges of the UK charitable sector.
The charitable sector is large and diverse.
There are over 150,000 registered charities in the UK, which reported a total income in 2002 of £20.8 billion and total operating expenditure of £20.4 billion. These charities employ 569,000 people - 2% of the paid workforce, two-thirds of whom work full-time. The sector has grown substantially since 1991, when there were 98,000 registered charities with total annual expenditure of £11.2 billion. Based on income2, health is the largest sector, followed by social care, education and culture (see Figure 1).
The largest charities attract most of the sector's funding.
While there are only around 230 charities with annual income of over £10 million, they garner £8 billion, or 38%, of the sector's income. Conversely, 89% of charities have annual income of under £100,000, yet total income for these organisations is only £1.8 billion, or 9% of total sector income. Thus, while larger charities tend to have relatively stable reserves on which to rely, small and mid-sized charities face heightened pressures when overall funding declines. Furthermore, mid-sized charities are perhaps most at risk, as small, local charities can more easily and quickly adapt to changing conditions, due to, for example, fewer paid staff and a smaller beneficiary base.
The public sector plays a prominent role in charitable sector funding.
Increases in statutory funding, which in 2002 comprised 37% of total sector funding, tend to flow primarily to large, national charities. Small, local charities tend to rely heavily on local government for income through either grants or fees for service contracts. However, such funding typically is short term, often for only one year at a time, forcing these charities to devote a significant portion of their limited resources to applying for further funding.
Charities are becoming more entrepreneurial, largely due to external funding pressures.
Many charities have set up social enterprises to generate independent trading income. For example, you might have donated items to a charity shop on the high street, or have attended a social function held at a museum or art gallery. Meanwhile, the sector continues to take on an increasing role in public service delivery, such as advice and counselling services and care for the elderly.
For more information on the charitable sector, refer to the Resources section of this Guide.
1 The data in this section, except where otherwise noted, is drawn from NCVO's UK Voluntary Sector Almanac 2004. Data excludes 'non-general charities', such as universities, housing associations, religious organisations and 'quangos', such as the British Council.
2 Top 10,000 Charities, CaritasData
© Copyright 2007 Association of Charitable Foundations (ACF)
Every effort has been made to ensure that the information provided in A Guide to Giving is current at the time of publication (October 2005), but the Association of Charitable Foundations (ACF) cannot guarantee its accuracy. Furthermore, there may have been subsequent changes to legislation, policy and/or to tax bands and rates. If you are considering any investment you should seek appropriate professional advice. This guide is not intended to replace professional advice on particular investments or the manner in which tax relief is applied under any scheme, and you should not rely on it for such purposes. You are responsible for your own tax and financial affairs and so should seek independent advice. ACF can not accept responsibility for the investment choices you make.
Views expressed in A Guide to Giving are not necessarily those of Philanthropy UK or the Association of Charitable Foundations.
Coutts & Co is not responsible for the content of A Guide to Giving, and the content does not constitute any advice whatsoever from Coutts & Co. The case studies and profiles within the Guide are not necessarily clients of Coutts & Co. Coutts & Co shall not be liable for any loss whatsoever arising from your reliance on any information produced in the Guide.
