The status of UK fundraising 2023

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Charities are no stranger to change, having navigated (or in some cases, still navigating) the results of a pandemic, a cost-of-living crisis, and a tumultuous geopolitical climate, all in the last three years alone.

 

But throughout these challenges, charities have been able to adapt, innovate their fundraising, and keep money coming in to fund the services needed more than ever by their communities.

 

The 2023 Status of UK Fundraising Report, from fundraising software provider Blackbaud, found that the number of charities reporting a growth in income in 2023 stayed relatively consistent with 2022 (33% and 32% respectively). However, fewer charities experienced a decline in income in 2023, with 26% saying they did so compared to around a third (32%) in 2022.

 

Though the growth in income may be slight, and far below the growth experienced pre-pandemic, the report suggests the overall direction is positive. Three in five charities told Blackbaud they met or exceeded their fundraising targets, with only 22% saying they did not meet it – one percentage point fewer than the previous year.

 

It is interesting to note, too, that more charities set a growth target this year – only 7% said they did not set a target, compared to 13% in 2022, 16% in 2021, and 18% in 2020.

 

The main driver of growth, according to the report, comes from exceptional gifts (49%), followed by planned new activities (37%). Indeed, the 33% of charities who said their income increased in the last full financial year are more likely to consider grants, legacies, and major gifts as their most important income sources.

 

The report, which also features insight from the Chartered Institute of Fundraising, highlights several key traits common to charities who have been able to survive during these challenging economic circumstances. Below, we explore three of these traits and outline what the future holds for the charity sector as a result of the progress made in 2023.

 

 

What is helping charities thrive in 2023?

 

 

Diversifying fundraising

 

Organisations with decreased income are more reliant on individual giving, ranking it as the second-highest income stream (22%) after grants (25%). For charities with increased income, individual giving ranked only as the fifth highest income stream.

 

This demonstrates the importance of having what the report calls a “more evenly spread income stream portfolio”. The report adds that the “greater emphasis on major gifts of growing organisations suggest that charitable organisations can improve their performance by focusing on income diversification and building relationships to secure more major gifts in the future”.

 

Charities should consider creating a strategy for diversifying their income, including plans to expand their individual and community giving programmes to grow major donors, grants, trusts and foundations, legacies, and corporate giving. Individual giving may ebb and flow according to economic circumstances, but, as the report concludes, “greater diversification enables higher sustained growth”.

 

 

Investing in digital

 

The report revealed that digitally mature charities – those driven by technological efficiency – are more likely to meet their fundraising targets than their counterparts. According to the report, digitally mature organisations “invest in tech, get the most out of their technology solutions and are more internally aligned”, making them more likely to achieve their targets, even if they do not experience an increase in income.

 

However, the report also revealed that too few organisations are prioritising fundraising technology. Only 34% invest in technology as a priority and 27% get the most out of the solutions they use, despite of 66% of charities saying that technology helps them improve relationships with their supporters.

 

 

Knowing your donors

 

With major gifts driving growth in the charity sector, it is more important than ever that charities nurture their existing donor relationships. This is where a charity’s CRM system comes in.

 

The report notes that “most organisations that have a fundraising CRM in place agree that a CRM is essential for building stronger donor relationships. This highlights that by investing in technology, organisations can improve relationships that can help them secure an increasing number of gifts.”

 

While the vast majority of respondents have a fundraising CRM in place (82%), only 25% say they get the most out of it. These organisations are more likely to say their organisation is willing to take risks, have a digital maturity score above the average of 5.4, and regard integrations as their biggest CRM challenge unlike the rest who struggle with internal alignment. The importance of using CRMs to reduce data siloes and build a collaborative culture is vital to boosting fundraising efforts and getting a fuller picture of your donor base.

 

 

What does the future hold?

 

Though 2023 has been a year of growth for much of the sector, the economy remains a concern. Four in five charities consider the current economic situation to be the biggest challenge facing the sector now and in the next three years.

 

Of the charities who said their income had decreased over the last year, 64% cited the wider macroeconomic climate as a cause, followed by 45% who said that their existing supporters were giving less than in previous years. These two factors are inextricably linked and demonstrate that the cost-of-giving crisis was perhaps an understandable fear for the charity sector during the last few years. With, albeit modest, signs of income growth in 2023, it is hoped that charities can adapt once again to these circumstances, get to know their donor needs, and meet them accordingly.

 

The report shows that optimism levels across the sector are generally high for 2024, with 53% of charities confident that they will meet their fundraising targets over the next 12 to 18 months. More than three in five (63%) are optimistic they will be able to retain donors and 56% expect to reach new audiences.

 

However, it does appear to be a time for consolidation amid the effects of the cost-of-living crisis. Only 41% of charities are optimistic that they will thrive over the next year, compared to 60% who said the same in 2021.

 

Fortunately, the report also highlights charities’ strong willingness to understand supporters, innovate, and adapt to change within the sector. With these factors contributing to growth in 2023, hopefully we can expect more of the same in 2024.