How the Charity Funding Landscape Has Changed and Its Impact on the VCSE Sector

The last decade has brought dramatic shifts in how charities are funded in the UK. Rising demand, falling income, and increased operational pressures have reshaped the voluntary and community sector (VCSE), leaving many organisations under strain. 

In this article, we explore the key funding trends over the last 10 years and what they mean for the future of charities. 

A Decade of Declining Resources and Rising Demand 

The UK charity sector is facing significantly greater funding challenges today than it did ten years ago. Since 2015, organisations have had to respond to: 

• A prolonged economic downturn 
• Reduced government and local authority funding 
• Rising operational and staffing costs 
• Increased competition for grants and donations 
• A growing demand for services from vulnerable communities 

While some charities have adapted through innovation and resilience, many, especially smaller, community-led organisations are struggling to survive in this changing environment. 

Economic Downturn and Cost-of-Living Crisis 

High inflation, rising interest rates, and stagnant wages have led to a national cost-of-living crisis.

As a result: 

• More people are turning to charities for essentials like food, energy, housing support, and debt advice. 
• Individual giving has declined, as donors focus on managing their own household budgets. 
• Corporate donations have dropped due to economic uncertainty and tighter margins. 
• Charities are being asked to do more - but with less. 

Reduced Government and Local Authority Support 

Funding from local authorities has been significantly reduced over the past decade. According to Civil Society Media, there was a £13.2 billion cut in council funding to charities between 2009/10 and 2020/21. 

The impacts include: 

• Smaller charities losing core funding, making it harder to keep services running 
• A shift towards short-term, project-based grants rather than long-term strategic funding 
• Greater instability in the sector, with some organisations forced to scale back or close 

Rising Costs, Stretched Budgets 

In recent years, the cost of delivering charitable services has soared. Inflation and energy price hikes have placed huge pressure on budgets. 

Key challenges include: 

• Higher costs for energy, transport, supplies and venue hire 
• Funding levels that haven’t kept pace with inflation 
• A widening gap between available funding and actual delivery costs 

A £10,000 grant in 2025 simply doesn’t go as far as it did in 2015. 

Staffing Challenges: Recruitment and Retention 

Attracting and keeping skilled staff is now a major challenge. 

• Salary expectations have risen due to inflation and competition from other sectors 
• Many charities can’t offer competitive pay, especially smaller ones with limited reserves 
• Staff shortages and high turnover are directly impacting service delivery 

This also affects funding: many grants don’t reflect the true cost of employment, making it harder to sustain or grow services. 

Adaptation and Innovation 

Some charities have responded to funding pressures by: 

• Embracing digital fundraising 
• Diversifying income streams 
• Adopting leaner operating models 

However, many others have struggled to adapt due to: 

• Lack of digital infrastructure or expertise 
• Limited internal capacity or leadership resource 
• Structural inequalities in access to funding and networks 

The gap between well-resourced and under-resourced charities has widened, creating a two-tier sector. 

Where Do We Go from Here? 

The last 10 years has fundamentally reshaped how charities are funded. The sector is now operating in a more competitive, more costly, and more demanding environment. 

To ensure long-term sustainability, funders must: 

• Recognise the full cost of service delivery 
• Offer flexible, core, and multi-year funding 
• Support staff development and retention 
• Invest in capacity-building for smaller organisations 

Collaborative Efforts Driving Change 

In recent years, national initiatives like the VCSE Assembly and the Civil Society Covenant have played an important role in strengthening the sector’s voice and fostering better relationships between charities, local authorities and government bodies. 

The VCSE Assembly provides a platform for charities and community organisations to influence policy, share best practice, and advocate for sustainable funding and fair treatment. 

The Civil Society Covenant represents a commitment between councils and local voluntary groups to work together, recognising the importance of the sector in delivering local services and supporting communities. 

These collaborative frameworks offer hope for more equitable funding arrangements and greater sector resilience in the years ahead. 

The Changing Landscape of the VCSE Sector in West and North Norfolk 

The VCSE sector in West and North Norfolk is navigating a period of significant challenge and change.  A recent consultation by Community Action Norfolk (CAN), on behalf of the Norfolk and Waveney Integrated Care Board (ICB), reveals a deeply strained landscape marked by rising community need, growing operational pressures, and funding uncertainty. 

Read the full article here.