Inflation and charity resilience: advice and insights

What will escalating costs mean for the sustainability of our organisations, the wider sector and the communities and people we serve? Richard Sagar, Head of Policy, Charity Finance Group explores the issue.

The Bank of England now predicts that inflation will remain at 9% for the year and peak at 11%*, in part due to supply side issues with Brexit and the aftermath of the pandemic, but also because of significant energy and food price increases.

Given the challenge, at the end of May, CFG invited a panel of experts to discuss inflation figures and forecasts, as well as share advice on how to remain resilient.

Jamie O’Halloran, economist, Pro Bono Economics emphasised three areas where high inflation will impact charity finances: reducing the value of donations – £20 in 2021 will be worth around £17 in 2024; the value of reserves will decline by a similar proportion; and to keep pace with current levels of pay, staff costs would need to increase.

Governance and audit

Judith Miller, partner at Sayer Vincent explained how finance teams can be a strategic leader for their organisations in these challenging times, emphasising three key elements of financial management: results, impact on reserves, and working capital. Lessons learned from the pandemic on how to deal with cashflow management and working capital could help, including rolling forecasts, reducing spend through better procurement, finding productivity gains and delivering through collaboration, where appropriate.

High inflation and investment

Patrick Truman from James Hambro and Partners spoke about the impact of inflation charity investments and the wider market, highlighting that after a strong year in 2021 for highlighting equities, 2022 will be much more difficult across all investment classes. It was noted that the UK and Europe look to be in a more challenging situation than the USA.

Recruitment and retention

David McDowell of Altum Consulting explored how rising inflation and the wider cost of living crisis will impact the jobs market, indicating that more than one-third of employers are concerned about staff retention, and a similar proportion of employees are considering changing jobs. According to David, the average pay increase for a candidate moving roles was 8.4%. Vacancies are outstripping the number of available candidates, with nearly 90% of all candidates being in multiple recruitment processes at once. David highlighted different ways to attract and retain employees aside from salary increase, including promoting flexible or remote working and secondments.

Key takeaways included: focus on internal talent first; understand what talent management plans you have in place; ensure you have flexible and creative benefit packages, and act quickly when recruiting.

No silver bullets

All speakers emphasised that there are no silver bullets when addressing high levels of inflation. However, with the right processes in place and good financial management, charities can help to mitigate some of the worst effects.

*All figures correct as of 7 July 2022 

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