How to prepare for a recession

The term ‘recession’ describes a continued period of negative economic growth, measured using gross domestic product (GDP). In the UK, a recession is officially declared when the country has spent two financial quarters in negative growth.

 

In everyday life, recession can lead to a drop in the value of property and other assets, job losses, and even a rise in poverty. Recession can impact the people who charities exist to serve, donors, and charity staff.

 

Economic growth in the UK faltered in February 2022 and GDP has continued to fall month on month. Energy and food prices are rising sharply as a result of the war in Ukraine and lockdowns in China. The Bank of England has not yet predicted a UK recession, but at the moment, all the conditions are present.

 

The UK briefly slipped into recession in 2020 as a result of the first lockdown, but the last major recession was in 2008/9.

 

 

What can we learn from the recession in 2008/9?

 

Every recession plays out differently because the underlying causes vary. For example, job losses in the 2008/9 recession were highest among white collar workers. However, recessions also have similarities, so studying the data on donor behaviour from 2008/9 could be helpful.

 

NCVO reported on donor behaviour in 2009. It found that the proportion of adults giving to charities in the UK remained roughly the same through the recession at 54%. However, the total amount given declined by 11% in comparison with 2007/8.

 

Interestingly, in the US, households reported, ‘no longer feeling connected to the organisation’ as the main reason for stopping donations, not being unable to give financially.

 

Legacy donations also decreased in value as the value of assets like properties and investments fell.

 

When it came to major giving, 75% of donors maintained their giving at the same level and some even reported increasing their giving.

 

Donations from companies crashed, but while there was a dip in trusts and grants income, it recovered quickly.

 

Overall the report concludes that individual reasons for giving vary, so charities should continue to ask for support throughout periods of recession.

 

 

How to prepare for recession

 

 

Macro Environmental Analysis

 

Research and analyse the environment that your charity might be operating in if recession hits. Use this seven letter initialism to conduct a macro environmental analysis looking at the following factors:

 

P – political   

E – economic

S – social

T – technological

E – environmental  

L – legal

E – ethical

 

Identify the needs, opportunities, and improvements the charity might need to make to whether a recession and continue to support the communities it serves.

 

 

Get clear on your goals

 

Review your current goals, objectives, and plans. They may need to be added to or altered as a result of your PESTELE analysis.

 

List them in order of priority, considering what you might need to press pause on in order to reduce spending but continue to meet your charitable purpose efficiently. Pausing rather than cancelling projects will allow you to review and reinstate them if they are still relevant once recession passes.

 

 

Get ahead with digital transformation

 

If the pandemic accelerated digital transformation at your charity, consider trying to complete projects while you can continue to invest in them. Depending on the nature of the project, digital readiness for continued economic downturn may end up saving or earning your charity money.

 

 

Invest in fundraising

 

If you anticipate an increased demand for your services as a result of possible rises in unemployment and poverty, you can begin planning emergency appeals now.

 

If you are overly reliant on a particular income stream, you have some time to fast-track investment in other streams, especially if this activity is already in your approved plans.

 

 

Prioritise investment in relationships

 

Your charity thrives on its community of supporters, service users and staff – during recession they may need extra care and support. Talking to your existing and potential donors, checking in with the people you serve and upping the frequency and thoughtfulness of your external and internal comms will help you bring people together.

 

 

Collaboration over competition

 

Putting the cause first and collaborating strategically with other charities working on the same issue could help to maintain progress. Sharing expertise and resources may offer options for income generation and cost-saving.

 

 

Keep learning

 

No two recessions are the same. If the UK does enter a period of recession in 2023 learning and failing fast will continue to be important.

 

Even without an officially declared recession, the environment that UK charities operate in has already shifted sharply. The cost of living crisis is reason enough to pause, take stock and plan for change.