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The Progressive Policy Think Tank

State of the Third Sector in the North West

The North West's third sector is performing surprisingly well — but uncertainty abounds, argues Jack Hunter

Recently, the failings of a notorious, and highly unusual, charity, Kids Company, again made headlines across the country. Along with occasional headlines about a funding ‘crisis’ among charitable organisations, the only time we seem to hear about the third sector is when there is a high-profile disaster.

On the ground, of course, charities and social enterprises and other organisations play a huge and important role within their local areas – and it’s time for policy makers, including of course the new mayors, to recognise it.

As part of our work on the Future of Civil Society in the North, IPPR North have worked with Tony Chapman at Durham University to carry out the first ever large-scale survey of third sector organisations working across the whole of the North West of England. A total of 1,462 responses were collected from organisations in every local area in the region, allowing us unparalleled insights into the state of the sector at a crucial time.

In-depth findings are available online and contain a wide range of important insights. For IPPR North, there are three key findings that are worth highlighting in particular, because they go against the grain of some of the ‘established thinking’ about what the charity sector is and how it operates:

Firstly, third sector organisations are a major part of the North West economy.

In 2016 third sector organisations (such as charities, social enterprises) employed 110,000 people on a FTE basis. This accounts for between 3-4% of total employment in the region – making it equivalent to the finance and insurance or information and communication industries.

When you add in the contribution of unpaid volunteers – many of whom provide the backbone of thousands of smaller charities – it is estimated that the third sector adds approximately £2.5bn to the North West economy every year. That’s massive – it’s just under a quarter of the entire economic output of Liverpool.

And that’s before we consider the huge indirect support that the third sector provides to the rest of the economy by, for example, tackling disadvantage, improving people’s mental and physical wellbeing and lobbying for change. Without the essential support that many third sector organisations provide, our economy and our society would crumble.

In other words, although people from inside and outside the charity world might not automatically think of it in these terms, the sector is an economic powerhouse in its own right.

Secondly, there is good evidence of strong relationships between the third sector and business.

It might sometimes be assumed that charities and other organisations do not have much to do with the private sector. Indeed, much of what is thought to make the sector distinctive is its commitment to people, places and social need rather than profits.

But these two worlds do not exist independently of each other. Just as, historically, the North West’s Victorian industries helped to support a thriving civil society through philanthropic giving, the third sector continues to enjoy significant support from business.

The Third Sector Trends survey provides clear evidence of this. It shows that the business community puts a great deal of resource into the Third Sector in North West England. This includes finance (57% of TSOs state that that they receive money from the private sector) but also in-kind support such as the provision of free facilities by business (46%), volunteer brokerage (42%) or pro bono advice (47%).

These are impressive figures but they could arguably be improved upon. We at IPPR North will shortly be commencing a new project looking more closely at what role business can and should play with local civil society organisations and networks, and how these types of productive relationships might be nurtured in future. Watch this space!

Thirdly, talk of a funding ‘crisis’ in the third sector may be overblown.

Some might think it useful to make apocalyptic predictions about the state of the sector – after all it’s a useful fundraising tactic to suggest that essential services are on the brink of collapse.

However, the data doesn’t provide much evidence to support this. Despite economic headwinds and the ongoing impacts of the UK government’s misguided austerity programme, over two thirds (68%) of respondents indicated that they experienced income stability over the previous two years, and a further 15% had significantly rising income.

Having said that, it is clear that certain charities are more at risk than others. Third sector organisations in the poorest areas are twice as likely to be in a financially vulnerable position (30%) when compared with the richest areas (14%). Those who are most reliant upon public funds (rather than, say, from private or community funders) are also far more likely to be in difficulty. Organizations serving people from minority ethnic groups are the most likely to be in a weak financial position (33%).

This suggests that those who are working in areas of greatest need are suffering disproportionately as a result of changes in funding and a wider economic slowdown. It implies that those who support Third Sector Organisations should work in a targeted and place-based manner to support these organisations to adapt and thrive.

For the first time, we have an opportunity to understand the state of the state of the third sector across the North of England and the important contribution that it makes, both economically and socially. As the work of the new Northern mayors and combined authorities begins to crank-up, policy-makers must look beyond the physical infrastructure of the 'Northern Powerhouse' to consider the social and human resources upon which the long-term future of the North West, and the wider North, will be built. As part of this, they must be committed to engaging with the third sector in a serious and sustained way, in order to work together to build healthy and resilient local economies.

Jack Hunter is a research fellow at IPPR North. This post is part of IPPR North's Future of Civil Society in the North programme.