Reading tea leaves: tracking the impact of the recession on giving

In December 2008 Philanthropy UK wrote about the slide into recession and speculation abounding within the national and third sector press, and amongst charities, about the dire situation ahead in which charitable giving would dry up like a drought-ridden savannah.

At the time of publication Philanthropy UK remained “cautiously optimistic about charitable giving”, acknowledging that donors are being cautious, but, “While the capacity of donors to give may have decreased, their commitment to the sector has not.  They remain passionate about their philanthropy, and recognise that charities, especially now, need their support.”

In this new regular column, three months on, we aim to sort the speculation from the true statistical situation.

Much has been written and discussed in the first quarter of 2009, alongside an increasingly negative picture of economic disarray, and while there is a growing indication of a decline in certain areas of giving there is also a strong thread of consistency in trends for giving.

Reporting of surveys and publicity-grabbing events such as Absolute Return for Kids (ARK), which has decided to halve the price of some of its tables in response to the financial downturn, can lead the reader to believe that the situation is arid if not fully desert-like.

Some factual background comes from the Charity Commission Economic Survey of Charities in England and Wales, compiled in January and February and published this month, which suggests that charities are indeed beginning to feel the pinch of the recession, though perhaps not in ways initially feared. Of those surveyed, 52% reported that they had been affected by the downturn, with 25% saying they had been affected significantly or very significantly. This is up appreciably from the last poll, in September 2008, when 38% said they had been affected, and 16% significantly or very significantly so.  

However this does not seem to be due to a precipitous fall in donations: 30% reported a reduction of income (while others were affected in other ways such as increased demand for services), and only 6% said that fundraising was the most affected source of income. The report also revealed that investment income is both the most common form of income for 42% of the 1,003 charities surveyed, as well as the source of income most affected by the economic downturn (cited by 22% of respondents). Furthermore, of the 11% of charities delivering or funding overseas activities, 52% reported that the fall in the value of sterling against other currencies impacted them.

But would that all reporting was as clear. For example, one recent report to hit the charity press headlines was Rapidata’s Charity Direct Debit Tracking Report 2009 which indicated in figures analysed up to the end of January 2009 that “Monthly cancellations skyrocketed in the summer of 2008 as the UK worried about the effects of the forthcoming recession, and rates are still increasing now.”

An increase in the annual rate of cancellations cited, to 4.62% in 2008-09 from 3.32% the prior year, is cause for concern, and could potentially represent millions of pounds of lost income to charities, but the report leaves many questions unanswered.  For instance – how broad is the sample, and are the results biased toward a particular segment of donors? The report’s conclusions also imply that all donors cancelling direct debits are doing so in order to redirect their charitable giving for other (non-charitable) purposes.  Undoubtedly this has happened, but we do not know to what extent.  In the midst of the banking crisis – what of the many account holders who have switched banks (remember those queues outside of Northern Rock branches)? How many of these direct debits were ultimately ‘transferred’ rather than ‘cancelled’? What has been the trend in new instructions?

So yes, the data is concerning, but not necessarily devastating, as the headlines imply.

But the headlines did get us reading the report – by a commercial company for whom the publicity might not be unhelpful. But within the report is the more helpful recommendation about a “culture shift in the way many fundraisers view their operations.” It highlights that, “For too long, too many fundraisers have focused on getting new donors, almost at the expense of looking after the donors they already have.”

Confirming this recommendation and confounding the Direct Debit tracking report’s findings is nfpSynergy’s Charity Awareness Monitor survey of a representative sample of 1,000 16+ year olds throughout mainland Britain in November 2008.

The charity-related questions that included donation habits, both past and future, found that “Charities should focus on their actual core donor pool, which remains resilient – especially amongst regular Direct Debit/Standing Orders (DD/SO) donors”; concluding that, “Those more likely to say they either have given less, or will give less, to charity during an economic downturn are less likely to have given anything anyway!”

The survey found that the figure of a third (34%) of respondents saying they expected to cut back on giving to charity in the next 12 months “was unduly weighted upwards by the fact that almost a half (46%) of non-donor respondents claim to give less: when they don’t actually give a penny to charity anyway, or at least they haven’t in the last three months!”

The moral perhaps is that it becomes even more vital for us to read the details of the surveys reported and of what was asked (and how), and to judge what the headline figures really represent – before we extrapolate the worst.

And that’s doubly important when there are some valuable messages revealed by the surveys.  nfpSynergy’s survey, for instance, found that regular donors who had given by DD/SO in the previous three months were more likely than other donors, who had given by more sporadic methods, to say that they gave more in the last year (27% DD/SO donors v 18% non-DD/SO donors) or expect to give more in the coming year (12% DD/SO donors v 8% non-DD/SO donors). This was “despite a marked dip in overall optimism since May 2008.”

And a G2 Data Dynamics survey of its panel of 30,000 UK consumers indicated strong core support from donors, in that “59% of existing donors stating their charity gifting ‘remains unchanged’.” But the headline you are likely to have read was that “20% of respondents who fall within ‘less well-off’ demographic classifications have already axed charitable giving from their outgoings”.  It was of course the negative slant that took the headline.

So the valuable message lurking beneath the doom and disaster headlines is that, ‘It’s the core donors, stupid’! – since G2 Data Dynamics also recommend focusing on core donors, with Alan Thorpe, Commercial and Operations Director, stating, “…there is still staunch support from many respondents. Charity marketers should think carefully about how to get the best out of their existing donor databases to make people stick with them and potentially persuade lapsed supporters to give again.”

New Philanthropy Capital (NPC) also indicates in its latest issue of Giving Insights that “The evidence so far is that giving levels remain steady. NPC advises donors of all shapes and sizes and has not yet had clients withdrawing or reducing funds.” NPC cites a recent survey by the Association of Charitable Foundations, which “found trusts willing to become more flexible to help struggling charities”.

And, who can forget those large red noses poking at all UK residents over the past month. Such was the groundswell of response to the annual Comic Relief charity appeal that this year’s Red Nose Day fundraising figure exceeded £60m, a record-breaking amount significantly ahead of the previous top total of £40.5m in 2007, despite the country being fully in recession.

As co-founder and vice chairman of Comic Relief, Richard Curtis said: "It is just incredible to see such a huge amount of money given by the public again on Red Nose Day. Red Nose Day is 21 years old this year and its success is down to the unrelenting support and ingenuity of our supporters – it belongs not to the comedians, but to the people who give.”

So our advice is to read behind the negative headlines, because on this month’s evidence there may be a positive story lurking underneath!  The indicators are that cautious optimism is still a healthy place to occupy, albeit with a hearty dose of lateral thinking.