Charities fear Brexit will lead to increased demand but put funding at risk

“The fall in the pound has already led to a 9%-13% cut in our programme funding,” says Jon Rosser, chief executive of World Child Cancer. The international charity, based in the UK, helps about 4,000 poor children in developing countries to get cancer diagnoses and care every year, by twinning hospitals in the UK and other western economies with hospitals in countries including Bangladesh, Cameroon, and the Philippines. Doctors and nurses volunteer their time, helping to train local medics so that they can diagnose and treat more children with cancer. The charity also helps families with drug costs.

But since the UK voted to leave the EU in June, the depreciation of sterling – which is down around 12% against the dollar alone – means that the charity’s grants are worth much less. “We have had to tell all programmes to start cutting back,” says Rosser.

It is by no means the only charity to feel the pinch, according to research published today by the Association of Chief Executives of Voluntary Organisations (Acevo). A survey of its members in the aftermath of the Brexit vote shows charity chief executives, representing more than 3,000 employees and 15,000 volunteers, are increasingly worried about the future.

Acevo’s research finds that nearly half of the charity leaders who took part receive funding from the EU, while more than 30% said that their indirect funding was “at risk” as a result of Brexit.

UK charities typically receive more than £200m a year in total in EU structural funds through the regional development fund and the social fund. In addition they can access EU money earmarked to help people in deprived areas take their first steps out of poverty and social exclusion and to provide extra support for young people aged under 25 living in regions where youth unemployment was higher than 25% in 2012.

Cornwall alone was expected to receive £2.5bn between 2000 and 2020 in EU subsidies, with millions of pounds going to charities now under threat. Charities across the UK, from social welfare voluntary organisations to international aid agencies, do not know whether they can still apply for EU funding, even though the government has not yet started to negotiate the terms of its exit from the EU.

“The European Commission is an important institutional donor for Oxfam,” says a spokeswoman for the charity. “This funding depends on membership of the European Economic Area (EEA) that includes non-EU members such as Norway, Iceland, and Liechtenstein. Thus the impact on [our] funding will depend on the shape of the UK’s continuing relations with the EU.” The Acevo survey also finds that three-quarters of charity chief executives envisage increased demand for services across the UK as a result of the “economic turbulence and rising unemployment” caused by Brexit.

“Demand for charities’ services is high across the board and Brexit is only going to add to that,” says Asheem Singh, chief executive of Acevo.

A number worry that the uncertainty will have a detrimental impact on the people they help. “Any prolonged economic uncertainty could risk leaving those we support more vulnerable and more at risk from hardship,” says Matthew Reed, chief executive of the Children’s Society. Paul Farmer, chief executive of the mental health charity Mind, agrees. “It is still too early to tell what impact the referendum result will have directly on Mind’s finances and operations,” he says. “However, we do know from past experience that economic downturns can have damaging consequences for the mental health and wellbeing of the nation, and during the last recession we saw more demand for Mind’s services. The Brexit decision has created a great deal of uncertainty for the public, with a lot of unknowns about what it will mean for personal finances, job security and housing. Uncertainty challenges our mental health, potentially making us feel stressed, anxious and depressed.”

The economic uncertainty means charitable donations will be unlikely to keep pace with this increase in demand for services. People give from their disposable income. If there is less of it, evidence shows there will be less to go round for charities. “If the economy performs less well, that will have a long-term impact on charitable donations,” says Karl Wilding, director of public policy and volunteering at the National Council for Voluntary Organisations.

Most charities are also deeply concerned about the impact of the referendum result on their ability to recruit and retain staff. The Acevo research finds that nearly two-thirds of the charity leaders who took part employ workers from other EU countries and were concerned about the wellbeing and job security of their staff. “We shouldn’t forget that charities are employers,” says Heather Rolfe, associate research director at the National Institute of Economic and Social Research.

According to Skills for Care, which helps adult social care organisations in England to recruit, develop and lead their workforce, 80,000 workers from other EU countries are employed in the sector. “At the moment, the only certainty is the level of uncertainty,” says Sharon Allen, chief executive of Skills for Care. “Are they going to be able to stay or will they have to leave?”

The prime minister, Theresa May, said in Poland last week that non-British EU nationals working in the UK would only have the right to remain in the UK if British workers in EU member states were also guaranteed those same rights.

And it is not just the future of existing staff that concerns charities. There has been talk of introducing an Australian-style points scheme in the UK, but this favours skilled migrants who want technical or professional careers. Charities, like small businesses, employ many non-graduates and “it is hard to see how a points-based immigration system could work for them,” says Rolfe.

If there is any consolation, it is the possibility, should the UK leave the single market, of no longer having to conform to the EU’s onerous procurement regulations. This could theoretically make it easier for voluntary organisations to win more contracts, says Andrew O’Brien, head of policy and engagement at Charity Finance Group. “On the plus side, if the UK decides to expand the Social Value Act [which requires public service commissioners to consider how they can also secure wider social, economic and environmental benefits], it could make procurement rules more beneficial for charities,” he says. But he also cautions that leaving the single market could allow the government to open up public sector contracts even more to the private sector and ditch the social value aspect of tendering.

For now, the only certainty is that nobody knows exactly how charities will fare after the UK leaves the EU. As Dan Corry, chief executive of New Philanthropy Capital puts it: “We do not know what kind of Brexit we are going to have.”

A retrograde step for the sector

The big society is dead. That’s the conclusion some have reached, following Theresa May’s cabinet reshuffle after she became prime minister. Charities’ role in public services have moved out of the Cabinet Office and into the Department of Culture, Media and Sport.

The Office for Civil Society is still responsible for charities, volunteering, social investment and mutuals. But now it and civil society minister Rob Wilson no longer sit in a department at the heart of government, but in the DCMS, further down the Whitehall pecking order. “Everyone’s concerned. There doesn’t seem to be a clear rationale: charities are not just about culture, media or sport. It feels like a downgrading,” says Andrew O’Brien, head of policy and engagement at Charity Finance Group.

Mark Fisher, the director of the OCS, denies the move means that charity policy is now seen as less important. Writing for the National Council for Voluntary Organisations’ blog, he insisted that there were lots of “synergies” with the DCMS, such as the Big Lottery Fund and its existing work with museums and sporting charities.

But Dan Corry, chief executive of New Philanthropy Capital and a former head of No 10’s policy unit, disagrees. “Having the minister in the DCMS is very peculiar. You cannot run social investment from the DCMS. If anything, it should be run from the Treasury or possibly the Department for Business, Energy and Industrial Strategy”.

Some feel that the OCS will struggle to push social enterprise or public sector mutuals from the DCMS. “We are a bit concerned that moving the Office for Civil Society from the Cabinet Office means the cross-cutting aspects of its work in the Cabinet Office could be jettisoned” says Asheem Singh, chief executive of Acevo.

And with civil servants understandably preoccupied with Brexit, the worry is that charities will no longer have the ear of senior ministers and public managers. David Cameron and George Osborne were very keen on social investment, social impact bonds and mutual spin-outs. Cameron coined the phrase “the big society”. The question is the extent to which the new prime minister and theher chancellor Philip Hammond share that.

While May clearly has some interest – she was shadow disabled people’s minister under William Hague, is a patron of numerous charities and has been an active supporter on the campaign to stop violence against women, will this translate to an appetite for charities to deliver public services?

Still not everyone in the charitable sector takes such a pessimistic view. Karl Wilding, director of public policy and volunteering at NCVO, points out that the OCS could end up with more clout within the DCMS, where it will account for around a quarter of the department’s staff. “OK, it’s the ministry of fun, but DCMS’s vision for the arts, media and sport is how it can contribute to a vibrant economy and that could be good for charities,” he says.

In the end even if big society is dead as a political slogan, the third sector won’t be going anywhere, says Cliff Prior, chief executive of Big Society Capital. “Charities and social enterprises have been doing their incredible work long before the ‘big society’ label and will continue to do so long after”.