Fundraising leadership: comparing and contrasting the economic crisis of today with the 2008-09 financial crisis

I’ve been asked several times recently about what happened to giving during and after the global financial crisis (GFC) of 2008-09 and whether there is any learning that can be applied to the current cost of living crisis.?

The first thing to say in relation to the GFC is that, whilst there are some learning points that we can take from that crisis, it is not a like for like comparison. The GFC saw six straight quarters of economic contraction in the UK. At the time, this was the worst recession since the second world war. However, data shows that real incomes are set to fall by more this time around than they did back then. Several other environmental factors are also different today - including the fact that we have just emerged from a pandemic.??

In terms of charity income, here is a summary of what happened at the time of the GFC:

• Major donor income largely held up, in fact some donors increased giving[1]
• Income from public fundraising (donations, community and events) took a small dip and then quickly recovered[2]
• Trusts income took a hit as investments lost value due to stock market falls, but then income recovered relatively quickly[3]
• Corporate income took a hit and then remained fairly flat[4]?(NB - the GFC hit the banks and finance companies hard, and the finance sector accounts for a big portion of corporate giving in the UK)

Below is a snapshot graph summarising the GFC:

When trying to draw comparisons between 2008-09 and today, let’s look at the key differences.?

1. Economic backdrop and hit to real incomes

The first thing to consider is the hit to ‘real incomes’. At the height of the global financial crisis, incomes fell by 0.2%. This time, they are set to fall by 3.4%[5]. That’s a big difference. Secondly, it is worth remembering that the 2008-09 crisis came after a decade of relative economic prosperity. This time around we are just out of a global pandemic. Whilst the pandemic saw many people increase their savings, this situation was not universal, and the economy overall is certainly weaker as the result of COVID and the lockdowns that resulted.?

2. Trust in charities

At the start of the global financial crisis in 2008, 53% of the UK public trusted charities according to the Edelman Trust Barometer[6]; today 48% of the UK public trust charities[7]. A similar decline can be seen in the Charity Commission research into public trust where the mean trust in charities has moved from a score of 6.6 in 2008, to 6.2 in the most recent data from 2022[8]?- that’s a drop of 6%. These percentage drops aren’t huge, but they do matter.?

3. Public views of the importance of charities

In the same vein as the data on trust in charities, the number of people in the UK who think that charities are ‘very important’ or ‘essential’ has also fallen - from 72% in 2008 to 56% in 2022, according to Charity Commission research[9]. This was also similar to the findings of the?Giving Britain?report in November 2021 where 41% of the public were categorised as either ‘Doubters’ or ‘Sceptics’ when asked whether charities are the solution to societal problems[10].

4. Public perceptions of making a tangible difference to people’s lives

High numbers of the public see charities as a vehicle for good. As donors, the public want to feel that their money is going to make a difference to the people that charities are there to help. Ensuring that a?‘high proportion of the money a charity raises goes to those it is trying to help’?is the most important and firmly held expectation of charities. It was cited by 77% of people in 2021, according to research by the Charity Commission - this number has also increased since 2008[11].?

5. Donor intentions during the cost of living crisis

Public attitudinal research shows that people intend to cut back on donating.??NFP Research’s study on giving intentions shows that 27% of respondents say they will give less to charity over the coming period compared to 14% back in December[12]. Another study by CAF found that 14% said they will cut back on their donations to help them save money.

Conclusions

These factors outlined above make the period ahead look more challenging than the situation in 2008-09. The only upside is that this current crisis should be over quicker than the one in 2008-09. Six quarters of shrinking economy was unprecedented, and this crisis should be over within the next 12 months. There are no guarantees on that but some respected commentators at the likes of the Bank of England, Reuters and Bloomberg all seem to think that this will be over by the middle of 2023. After that inflation will return to close to target levels.?

There is also another potential variable at play: the change in Prime Minister. At the time of writing the Conservative party are in the process of electing a new leader. Various candidates have made statements about different economic tactics to reduce some of the cost of living pain for the public. Whether any action results and, if so, whether the action proves to be effective, is a different matter. However, the change of Prime Minister could lead to a government intervention that has a notable impact and this could take a little of the sting out of things.?

The final point to make is that fundraisers need to be supported by CEOs and trustee boards. Short term measures to try to bolster in-year numbers, like cutting fundraising investment, are likely to be detrimental to net income over the longer term.??Now is a time for all leaders to hold their nerve. If income does start to dip, trust in the fundraising experts and don’t pause activity or cut investment. There are proven fundraising practices in challenging times - these should be top of mind from the period during the pandemic:

• Don’t stop asking for money – charities will be more vital than ever during the crisis and the UK public is incredibly generous even in the face of adversity
• Use stories to show how the crisis is hitting the people your charity helps and remind donors / potential donors why their support is so important?
• Keep focussed on great stewardship of supporters – including those that stop or pause their donations?

[1]?‘Tomorrow’s Philanthropist’?Barclays Wealth, July 2009?

[2]?NCVO Civil Society Almanac 2017

[3]?NCVO Civil Society Almanac 2017

[4]?NCVO Civil Society Almanac 2017

[5]?Bank of England Data, Summer 2022

[6]?Edelman Trust Barometer 2008

[7]?Edelman Trust Barometer 2022

[8]?Charity Commission, Public Trust in Charities 2008 and 2022

[9]?Charity Commission, Public Trust in Charities 2008 and 2022

[10]?The Good Agency, Giving Britain, November 2021

[11]?Charity Commission, Public Trust in Charities 2008 and 2021 – note slightly different measures make it hard to be exact with the reported increase

[12]?NFPSynergy, Charity Awareness Monitor