Responding to the Recession

The VCS Assembly has been working to understand the impact the recession may have upon local Voluntary and Community Sector groups and organisations.

Key elements of work have included:

• The completion of a VCS Recession Survey
• A Responding to the Recession Workshop
• The development of a Local Resilience Action Plan

To find out more, download the following documents:

Report VCSA Recession Survey (99.63KB)

Shropshire Local Resilience Action Plan (285.41KB)

Potential negative and positive impacts of the recession on VCS organisations have been identified through national research, and these are highlighted below:

Negative impacts

• An increasing number of people requiring support:
  • More people out of work
  • More people experiencing debt
  • More people suffering from stress and associated mental health problems
  • There will likely be a higher need for welfare services, advice and counselling (e.g. debt, housing, employment).
• It is likely that corporate giving will fall.
• Funding from government may fall - evidence from other recessions is that income from government fell - leading to an even greater need to demonstrate and deliver efficiency and value for money.
• Investment and legacy income will be affected by the falling value of assets (equities, bank deposits, property) and lower interest rates.
• Falling investment income will impact upon trusts and foundations and evidence suggests that many may reduce grant-making.
• VCS staff may face the threat of redundancy.
• Lack of available funding to cover volunteer expenses may reduce the number of people able to fulfil their unpaid roles.
• Social tension can be experienced to some degree as competition for resources increases.
• People will be more careful with their spending, reducing expenditure of non essentials such as luxuries and leisure. This could have an impact on some part of the sector.
• Smaller VCS groups and organisations and those who are not as well established are likely to be most vulnerable within a recession. National research concerning economic downturns suggests that the strong get stronger and the weak get weaker. Larger organisations typically have wider resources to draw from (including reserves) and a more specialised workforce (including fundraisers and volunteer co-ordinators) who can respond to shifting needs.
• There is a danger that groups providing more specialist services to vulnerable people in the most remote/rural locations, or those working with the hardest to reach could be affected to a significant degree. This type of service provision is likely to be most costly.

Positive impacts

• An increasing number of people requiring support (this can be positive and negative depending upon the service and available capacity). There will likely be a higher need for welfare services, advice and counselling (e.g. debt, housing, employment).
• Although unemployment will rise, and cause problems for service users, it can also lead to a potentially larger pool of volunteers, some with professional and specialist skills that can support and benefit VCS organisations.
• Skills gaps and shortages previously experienced within some areas of the VCS may ease as there is more competition for jobs.
• It is possible that some contracts and funding arrangements may be negotiated at a longer term as awareness over the potential impact of uncertainty within a recession increases.
• There will be an increase in beneficiaries for some organisations. Evidence from other recessions suggests that charitable giving does not fall but that donors focus on causes they already support.
• There is likely to be an increase in spending for Charity shops.
  

Key Issues for the VCS

• The VCS will be affected by the recession in a different way to other sectors because of a number of factors including:
  - a dependence on charitable giving and statutory sources of income;
  - a reliance on support from within the sector (e.g. grant making bodies);
  - a reliance on investment income; and
  - the size of most VCS organisations and groups - many are small and don't have reserves to see them through lean funding periods.
  
• VCS bodies of different sizes will be affected in different ways. Resilience is often linked to size and presence (e.g. large, well known, established charities have previously survived recession well). Large charities have the resources to support strategic planning, service development/adaptation, and often have financial reserves to fall back on.
  
• The sector's total income does not necessarily decrease in economic downturns. While in previous downturns, some charities reported decreases in income, approximately an equal number reported increases, with the other third reporting no change. This leads to the conclusion that organisations experience downturns differently with some possibly benefiting from more targeted funding and giving by beneficiaries. Responses therefore may need to be individual and targeted to reflect different experiences of organisations.
  
• Sub-sectors fare differently. In the last recession some parts of the sector in the UK saw an increase in income, such as international aid and faith-based organisations. Other areas of work (including housing, general social services, community and economic development and the arts), saw needs (unemployment, homelessness, poverty) grow more severe whilst income fell.
  
• The impact of the downturn on need for VCS services will be uneven, both sub-sectorally and geographically; levels of need are likely to change in both areas. It is likely that there will be a higher need for welfare services, advice and counselling (e.g. debt, housing, employment), but a lower demand for fee-charging leisure and cultural activities (e.g. theatres).
  
• The impact on the unpaid workforce is mixed. While there also may be a potentially larger pool of volunteers, there are costs associated with volunteering to both the volunteers themselves (e.g. transport), and organisations (e.g. training and management). Without organisational support (such as reimbursement of expenses) volunteers tend to drop off, and as the costs associated with volunteers rise, organisations' capacity to use them is reduced.
  

Taking Steps to Respond to the Recession

• Undertake analysis of your organisation. This should help you to consider a wide range of issues. 5 main steps may help:
  1. Map the drivers (trends/forces) positively or negatively influencing your organisation.
  2. Consider which drivers are most important and interesting.
  3. Research the drivers that matter most.
  4. Consider the implications of these drivers - do they generate any opportunities?
  5. Make decisions concerning how you will respond.
  
• Plan for the recession. Look at funding streams, beneficiaries and costs and plan likely scenarios. Can you be more efficient in the way you do things? Can you save money by outsourcing some of your office functions?
  
• Revisit your costs. Use this opportunity to renegotiate contracts with your suppliers (who will need your business more).
  
• Develop your volunteers. Are you making the best use of their skills? Do you have a strategy to attract the volunteers you need, especially the pool of highly-skilled newly unemployed? Do you understand the influence of the recession on your volunteers and are you prepared to work with them to manage issues?
  
• Build your network. With the sector facing the squeeze, collaboration can enable you to achieve more and accomplish your aims, despite having fewer resources. It may be tempting to focus on service delivery but don't loose your contacts and access to information that may benefit you.
  
• Evidence the changes you experience. Many organisations may see an increase in demand, this should be recorded in order to demonstrate needs and to influence grant making bodies.
  
• Try and think differently. Involving others may help. Can you overcome obstacles and challenges by doing things in a different way? Are there any ways you can be more innovative? Don't be afraid of change but do consider risk.
  
• Demonstrate your success. Measuring outcomes and demonstrating impact is notoriously hard to do. However, it is a great way to improve your chances of securing funding.

Useful Links and Resources

NAVCA (National Association for Voluntary and Community Action)
NAVCA has a wealth of information concerning the recession on its website at:
http://www.navca.org.uk/localvs/recession/key/

NCVO (National Council for Voluntary Organisations)
The NCVO website has a section with tips on how to survive the downturn:
http://www.ncvo-vol.org.uk/downturn.asp
http://www.3s4.org.uk/

ACEVO (Association of Chief Executives of Voluntary Organisations)
ACEVO has information on supporting the Third Section in the Recession on its website visit:
http://www.recessionsupport.org.uk/main/

Development Trust Association
The Development Trust Association has an early warning guide to help VCS groups and organisations assess how the recession is impacting upon them:
http://www.dta.org.uk/resources/publications/earlywarningguide

RAWM (Regional Action West Midlands)
Regional information concerning the recession is available from:
http://www.rawm.org.uk/page/our_work/category/projects/call_to_action_a_third_sector_response_to_the_economic_downturn

Shropshire Council
Shropshire Council has published recession information in the form of advice for Shropshire businesses and advice for Shropshire residents. For details and links to a range of information sources visit:
http://www.shropshire.gov.uk/needalittlehelp.nsf