The National Trust and the Future of Charities
Last week’s sad but not unexpected news that the National Trust, which looks after 500 historic houses, castles, parks and gardens, will be making significant job cuts, laid bare the profound challenges facing organisations that operate within the charity and third sectors.
Internal Restructuring
The charity stated that it expects to cut 550 jobs in its efforts to save £26m which it attributes to the autumn budget that has resulted in the increase of more than £10m in the cost of employer’s national insurance and the minimum wage since April.
The cuts are expected to affect frontline roles including staff working in cafes and shops, as well as conservation assistants, who carry out preservation work in historic buildings. The cuts will impact 6% of its 11,000-strong workforce.
Risk Mitigation
Against the background of similar cost-cutting measures announced in recent times by charities including Scope, Dogs Trust and Oxfam, we would expect charities, not for profits in general and their professional advisers to, amongst others, consider the following.
1. Reserves Policies: Reviewing on an ongoing basis and, where necessary, updating their reserves policies to ensure that the organisation’s financial safety net is still fit for purpose.
2. Diversifying Income Streams: Taking steps to reduce the organisation’s reliance on a single or limited number of funding sources.
3. Sharing Resources: Exploring opportunities to work with other charities or organisations, perhaps through sharing services (e.g., IT, HR, office space), combined efforts to deliver projects or bid for contracts, joint fundraising etc.
4. Financial Review: Carrying out regular financial reviews and ensuring that up-to-date financial information (management accounts, cash flow, budget vs. actuals) is available.
5. Considering Mergers: Where a charity’s circumstances are such that its viability is threatened, it is vitally important that charity Trustees and their Executives consider and discuss, at an early stage, the possibility of a merger with another charity or charities with similar purposes.
The Way Forward
Difficult economic times often present significant challenges for UK charities. Inevitably, smaller and more localised charities tend to be more exposed to economic shocks than the larger charities with greater revenue and diversified income streams.
At Leathes Prior, we have a specialist team of lawyers with considerable experience in advising charities and not-for-profit organisations on, amongst others, governance, employment law, commercial law, and related matters. For specialist advice and guidance through what can be a challenging time for charities and not-for-profit organisations facing difficulties, our Charity Team would be pleased to assist you with this. You can contact us by email at info@leathesprior.co.uk, or by telephone on 01603 610911.