‘Fighting over smaller pots’: Charities face double blow after funding cuts and donation decline

Sector leaders warn that headline donation figures reflect a far more fragile funding reality, with public generosity harder to unlock, government funding retreating and charities increasingly “fighting over smaller pots”.

Liz Rutherford, chief executive of the Single Homeless Project (SHP) - one of London’s largest homelessness charities - said years of cuts have left councils unable to meet growing need.

She said: “The statutory landscape is increasingly volatile – since 2010, local authorities have been cut to the bone.

“Even though we’re largely funded by the state, the people we work with are extremely disadvantaged, and many of the wider services they should be able to access – mental health support, substance treatment – have fallen away.”

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Chris Greenfield, SHP’s assistant director of fundraising, said competition for charitable funding has intensified sharply.

He said: “AI has made it easier for charities to write applications, so everyone’s applying.

"You might spend weeks on a bid, only to find it’s closed after a week because they’ve had over 1,600 applications for 15 grants.”

Mr Greenfield said charities are now competing in what he described as a crowded and shrinking funding ecosystem.

He said: “People have less disposable income, statutory funding is shrinking, and more charities are chasing the same donors, trusts and foundations.

“November was really tough.”

In December, LBC reported on CAF forecasts that festive donations could fall by more than £40m amid the ongoing cost-of-living crisis and climbing inflation.

Final figures show that £2.85bn was donated over the festive period, down from £2.9bn the previous year – a larger decline than the Charities Aid Foundation (CAF) had predicted.

Nicholas Connolly, chief executive of youth homelessness charity EveryYouth, said the charity saw individual donations fall by almost 10 per cent over Christmas.

He said: “Usually we’d see an uplift, but in 2025 we experienced a significant decline.

“Last year was particularly tough across all income streams, with both individual and corporate donations falling short. That led to service cuts and job losses.”

Mr Connolly warned the sector is facing what he described as a “perfect storm”.

He said: “Inflation and increased taxes on employment have pushed costs up rapidly.

“There are no surpluses to plug the gaps and reserves are being decimated.

"Unless something quickly changes, millions of people who rely on charities will see the rug pulled from beneath them.”

For SHP, festive fundraising ended slightly up on last year – but only after significantly more effort.

Mr Greenfield said: “We did see an increase compared to 2024, but it took a lot more work, over a much longer period and significantly more resources to get there.

“It definitely wasn’t easy.”

He said the homelessness charity launched its Christmas appeal unusually early – in September rather than late October – in response to CAF’s gloomy forecasts.

He said: “We saw a really strong community response at the start, largely because we were one of the only charities to launch our campaign so early."

But as appeals intensified across the sector in November, donations dropped sharply.

The Charities Aid Foundation has echoed the sector's concerns.

Ashling Cashmore, CAF’s head of impact and advisory, said charities supporting the most vulnerable are facing higher demand and greater costs just as festive donations decline.

She said: “After a challenging 2025, it’s understandable that households have had to cut back or pause their Christmas donations.

“But for those who are able to, charities would greatly welcome support – whether through giving, donating goods or volunteering.”

Demand for homelessness services continues to rise.

Single Homeless Project has reported growing pressure on accommodation for people coming off the streets and severe barriers to moving on into permanent housing.

In London, fewer than 3 per cent of private rented homes are affordable for people on benefits, while the long-term decline in council housing has narrowed alternatives.

The charity has called on the government to increase funding and commission homelessness services alongside health and psychological support, not just accommodation.

Founded 50 years ago, Single Homeless Project supports people at every stage of homelessness across London.

Last year it helped around 10,000 people through outreach services, emergency hubs, hostels, supported housing and prevention work with people leaving prison or struggling with rent arrears.

Clients range from 18 to 90 years old and often face overlapping challenges including mental ill health, substance dependency, domestic abuse and chronic physical conditions.

Despite the strain, charities say the festive period showed communities and businesses are still willing to help – but goodwill alone cannot sustain services.

Mr Greenfield said: “People do feel poorer, and charities are fighting over smaller pots. We got through Christmas this year, but it took more effort than ever.

“Without real, stable investment, it gets harder every year.”