Decision Day: The Potential Impact for the Third Sector

On what promises to be a pivotal election day, McLean Public’s Neal Mankey, Partner for Health and Social Impact, suggests what might be in the inbox of the incoming government for the UK’s Third Sector.


Third Sector organisations have been under pressure for a number of years now around financial sustainability, the current cost of living crisis and meeting the ever-increasing demand for services. To help navigate the impact of these pressures, charities have needed to adapt, strategize and innovate to remain resilient. I am in the unusual position of being the Chair of a national charity- ADHD UK- and so I know only too well the impact that lack of funding and revenue is having on our service and community. We have had to scale back on staffing costs which were already incredibly lean, go fully remote and rely on the goodwill of our volunteer base who have been absolutely amazing. We are effectively trying to do more with less, whilst staying afloat. Let’s look at the three key challenges in turn for the sector:

Financial Sustainability

Economic challenges have been impacting operational costs and financial sustainability across the Third Sector for a prolonged period of time for a number of reasons such as Covid-19, which was followed by the war in Ukraine and the subsequent rise in energy costs. These all had a detrimental impact on Third Sector organisations which have seen a rise in inflation and bank interest rates as well as a reduction in donations due to the cost-of-living crises. The vast majority of charities are constantly dealing with the challenges of low reserves and income generation whilst also trying to meet the needs of the communities they serve. Running costs are also increasing whilst income is falling as people have less to give, with smaller charities being particularly more vulnerable to the decrease in donations and declining government funds, which is another pressing challenge. Income from both local and central government, along with income from grants and government contracts has declined and government spending cuts have resulted in charities needing to scale back. The financial constraints of both local authorities and health partners will continue to impact significantly on Third Sector organisations, with reductions in the number of Third Sector enterprises, staff and volunteers expected across the sector. This will simply have a detrimental impact on so many communities that rely on their support and at a time of increased social and economic need. The incoming government will need not only to tackle the impact of this but also address the fundamental causes, entrenched now for years.

Meeting Increasing demand

Over the past few years, the Covid-19 pandemic and now the cost-of-living crisis, has resulted in charities seeing an increase in demand for their services, resulting in many running out of options to meet the high demand for their services. A large proportion of charities simply don’t have the funds to meet current service demand, meaning many are, to put it bluntly, overwhelmed. Many have innovated, reconfigured or reduced services but now have no room to cut further and are using their reserves to cover core costs. These factors are all accompanied by what can only be described as a staffing crisis. The VSCE Sector Barometer shows that 36% of charities struggle to recruit staff and are unable to meet demand as workloads increase. Given this scenario, collaboration and partnership working to maintain and further develop the strength of the relationships between the third and public sector will be key for any government policies ahead in order to ensure more joined up service delivery.

The current cost of living crisis

The cost of living crisis is having a huge impact on third sector organisations in terms of organisational sustainability with the sector experiencing rising unmet wage costs, a depleted workforce, constant recruitment and restructuring pressures, the additional mental health impact on both their staff and people seeking support, along with a rise in demand for their services. The financial constraints of both local authority and health partners will continue to impact significantly on third sector organisations, with evidence suggesting that a shrinking Third Sector will reduce social resources that help communities cope and respond to new and emerging threats, which will only weaken community resilience.

There have been few specific policy commitments made in the manifestos that directly relate to charities. Both Labour and the Liberal Democrats include plans to address challenges in the workforce with Labour pledging to get more disabled people into work. The Conservative manifesto has pledged to work with civil society, individuals and businesses to increase philanthropy. The Liberal Democrats will commit to a long-term workforce strategy that addresses skills gaps across the UK which could potentially prove significant for charities given the challenges in recruiting and retaining staff.  

As an experienced executive recruiter who knows the Third Sector well, I think it’s vital that any new government commit to resetting its relationship with civil society as there evidently needs to be a fundamental rethink of its relationship with charities. Our very social fabric and wellbeing is directly impacted by the challenges charities are currently tackling and these will be of vital  importance for whoever walks through that famous black door tomorrow.  

If you’re struggling to diversify your organisation’s workforce, please get in touch as this is something McLean Public can support you with.

Neal Mankey

Partner, Health and Social Impact



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