Bigger charities becoming more dominant

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26 January 2011

Bigger charities have grown more than smaller charities since the mid-1990s, but it is not necessarily the very biggest charities that have enjoyed the highest income growth. These are the findings of research by Peter Backus of the ESRC Centre for Charitable Giving and Philanthropy and Dr David Clifford of the ESRC-funded Third Sector Research Centre.

There are around 170,000 active charities registered with the Charity Commission in England and Wales. Around half of these are small, with an annual income of less than £10,000. There are a few hundred very big charities with an annual income of more than £10 million.

The researchers examine trends in the shares of total charitable income accounted for by the top 1 per cent and top 10 per cent of charities. The results suggest that there has been little change: income was very highly concentrated in both the top percentile and the top decile in 1995, and it remains so today.

But trends in income shares only tell part of the story, since both the number of charities and their total income have increased significantly. So the researchers go on to examine the growth rates of the set of charities that have existed since the mid-1990s, relating income growth to initial charity size.

Initially bigger charities have grown more than initially smaller ones. Organisations with an income of at least £500,000 in 1998 had a higher median (average) growth rate over the following decade than those that were initially smaller. This is true both for the whole set of charities and for charities classified as social service organisations.

These findings are consistent with the idea of a 'professionalisation' of the charitable sector, but not necessarily a 'Tesco-isation', where the initially very largest charities would have the highest growth rates of all. For the whole set of charities, the initially biggest did grow fastest. But for social service organisations, the initially 'big' charities in general but not the initially 'biggest' in particular had the highest growth rates.

These results are relevant to government plans for the 'Big Society', which rest in part on the ability of smaller, community-based charities – as well as the bigger voluntary bodies - to thrive and grow. Some people are concerned that the biggest charities are becoming more dominant, marginalising innovative methods adopted by smaller charities, which they argue are often better able to respond to local needs.

From the ESRC magazine Britain in 2011