Emma Marshall

Research from the third sector in Scotland, stark admissions from those at the helm – and anecdotes from our own clients – backs this up.

The situation has been described as a “doomsday scenario” where charities are overwhelmed, underfunded, and expected to compensate for the failures of strained public services without adequate support.

The Scottish Third Sector Tracker is a growing research community made up of representatives from third sector organisations willing to share their experiences, views and concerns as the sector faces both new and ongoing challenges.

The Tracker asks questions relating to their current organisational challenges, demand for their services, paid staff and volunteers and financial health.

The Scottish Council for Voluntary Organisations (SCVO) this summer published a report on this research. The findings highlight a growing crisis for small charities and voluntary organisations in Scotland:

• Financial strain is widespread: 81% of charities are facing financial challenges, driven by increased demand, falling income, and higher operating costs.
• Future funding is uncertain: Only 13% have secured full funding for the next year, while over a third have none confirmed at all.
• Services and jobs at risk: 60% say financial pressures are affecting service delivery; over 10% have already cut programmes, with similar numbers facing redundancies.
• Survival depends on reserves: More than half are relying on reserves to stay afloat, but this is unsustainable for most.

Without urgent action, the consequences for communities across Scotland could be severe. Despite their crucial role in community wellbeing, these organisations are under severe strain.

The experiences of some charity chief executives echo the findings of the recent SCVO report.

Stephanie Fraser, CEO of Cerebral Palsy Scotland (CPS), recently reported that the situation was ‘dire’, while CEO of Scottish SPCA, Kirsten Campbell, claims that the Scotland’s charitable sector is in ‘crisis’. In her parting message, Campbell described a “doomsday scenario” where charities are overwhelmed and underfunded.

She highlighted some of the key challenges:

• Charities face soaring operational costs: energy bills, wages, and National Insurance have all risen sharply, while funding has fallen. 
• Demand is surging: 63% of charities report increased need, and over 90% of front-line groups saw worsening community conditions in 2023. These pressures mean charities are now providing services like food, mental health support, and even basic transport, areas once covered by public bodies.
• Campbell called for a systemic shift: better collaboration between public, private, and third-sector organisations, and a rethink of funding strategies. She urged the government to convene a cross-party summit on the sector’s sustainability.

Something must be done. Scottish charities cannot be expected to take on an increased load from a cutting back of under-strain public services without adequate support.

For some Scottish charities, the challenge has already proved too much. In June, Saheliya, an award-winning mental health and wellbeing support charity working with women facing racial inequality, went into liquidation. Saheliya had helped nearly 1,000 women from 39 countries and had previously been recognised for its work, including winning Charity of the Year in 2016.

Similarly, Mental Health Aberdeen – which had been operating for 75 years – closed, citing growing pressure on its services. In its announcement, the charity called on “funders, partners, decision-makers, and government policy makers” to recognise the need for more investment in mental health services… “before it’s too late.”

Sadly, they certainly won’t be the last. Operational costs and funding uncertainties are pushing charities in Scotland to the brink. The impact of this is astronomical in terms of service provision and jobs. Charities provide vital support in communities, drive positive social change, raise crucial awareness and address unmet needs of those most vulnerable in society.

The value to the economy also cannot be underestimated. Latest figures from 2024 show that there are more than 24,500 Scottish charities with income of almost £18 billion and more than 217,500 employed staff (OSCR figures).

Steps must be taken now to stop the stream of charities having to make the most difficult of decisions… to close, devastating their staff and volunteers and harming the lives of those who rely so heavily on the vital work that they do.

Emma Marshall is an audit director in MHA’s Edinburgh office