Britain's vast network of charities and voluntary organisations is entering 2026 facing a perfect storm of financial pressures, rising demand, and dwindling resources, threatening their vital role in holding communities together.
A Sector Under Severe Strain
The prolonged impact of austerity, the pandemic, and the ongoing cost of living crisis has sent demand for charity services soaring. Yet, at the same time, funding has collapsed. State support from central government and cash-strapped local authorities has become increasingly inadequate, while charitable giving has fallen to its lowest level since records began. Fewer people are volunteering, and operational costs have risen dramatically, exacerbated by increases in employers' national insurance contributions.
The scale of the crisis was highlighted in a parliamentary debate following Labour's election victory, where former MP Jeff Rooker, now Lord Rooker, praised groups like Hands Together Ludlow. Such organisations, he said, provide food, support, and community spaces, effectively "keeping society going" where statutory services fall short.
Household Names Hit, Grassroots Struggling
For major national charities, 2025 proved to be an annus horribilis. The mental health charity Samaritans announced in July it would close half of its 200 branches. Macmillan Cancer Support has cut a quarter of its staff and reduced hardship grants. Oxfam and the counselling charity Relate have also shed jobs or face further losses. Simultaneously, some institutions have become targets in culture wars, diverting energy from their core missions.
At the grassroots level, the situation is even more precarious. Thousands of smaller organisations are fighting for survival, depleting reserves and cutting services. A summer survey by Voluntary Norfolk found half of the county's charities feared they would have to make staff redundant. Burnout among overstretched workers in insecure roles is a growing concern across the sector.
Labour's 'Covenant' and the Need for a Reset
The new Labour government, which aspires to place civil society at the heart of civic renewal, faces a monumental challenge. In July, Prime Minister Sir Keir Starmer launched a civil society covenant, acknowledging the sector's broad scope, which includes formal charities, community groups, and faith organisations. However, critics argue that warm words must be backed by concrete action and resources.
The history of the voluntary sector's relationship with the state has been one of shifting boundaries. In the 1960s and 70s, campaigning groups like Shelter and Friends of the Earth acted as critical friends to government. Later, Conservative administrations from Margaret Thatcher to David Cameron promoted voluntarism as a substitute for state provision, often overloading charities during times of austerity.
Sir Keir's covenantal approach echoes the New Labour-era "compact" and Gordon Brown's subsequent funding boom for voluntary welfare providers. Yet, the landscape today is far harsher, shaped by two lost decades of flatlining growth and pared-back Whitehall budgets following the 2008 financial crash.
For Labour's covenant to be meaningful, it must find ways to secure both the financial and human resources the sector desperately needs. The National Council for Voluntary Organisations reports that for most charities, grants and contracts have not covered costs since 2020. Alarmingly, donations have fallen most sharply among younger people, with "affordability" cited as the key reason.
Charities are a proven social and economic asset, trusted by users in ways that the state and private companies often are not. Their preventive work saves public money by stopping problems from escalating into crises. The country's 160,000-plus charities contribute immensely to the economy and social fabric. A sector this indispensable deserves more than a constant, failing battle to do more with less. As 2026 begins, the government's talk of an empowering alliance must quickly turn into tangible support.
