Beyond individual trade-offs: what if funders focused on what they can do, rather than what they can’t?

The financial pressures on civil society right now are immense. NCVO has called 2025 ‘the year of the big squeeze’, with costs increasing, demand climbing and ‘increased competition for every pound’. New research shows that nearly half of small charities in the UK fear they are at risk of closure within a year. This is having a devastating toll on the sector’s workforce and the communities they support.

Although grant-makers have a relatively privileged position within civil society, they are not immune to the impact of these challenges facing the sector. As demand for grants rises, foundations are being pulled in multiple directions as they grapple with trade-offs such as:

• Respond to urgent needs, or focus on longer-term work to tackle underlying causes? 
• Keep criteria broad (risking higher demand and lower success rates), or focus more narrowly (leaving some areas of work excluded from funding)?
• Support existing grant-holders for longer, or be more open to new applicants?

At the Association of Charitable Foundations (ACF), we’ve been supporting grant-makers to navigate these challenges. Following a meeting with more than 100 of our members, I wrote about nine ways that foundations can respond to rising demand – each based on actions they had taken and learning they shared.

Spending more

Many foundations have considerable flexibility about how they balance spending to meet today’s needs with investing to meet the needs of the future. While accelerating spending might not be the right choice (or even possible) for every foundation, financial independence brings with it a responsibility to consider all available options.

So, right at the top of ACF’s list of possible responses to rising demand was: make more funds available. 

The latest data published by UKGrantmaking shows that many foundations have done just that. In 2023/24, total grants by trusts and foundations increased by 12% to £8.2bn.  This continues a trend of above-inflation annual increases in grant-making since the Covid-19 pandemic – despite endowment levels declining in real terms over the same period.

This is a positive and significant contribution, though on its own it’s far from being a complete solution to the scale of the challenges civil society is facing.

Foundations are just one part of a broader funding ecosystem, contributing around 10% of UK charities’ total income. Public donations and government contracts each account for a far larger share. However, UKGrantmaking also reveals that trusts and foundations have overtaken government bodies as the largest source of grant income to the voluntary and community sector, as government grants failed to keep pace with inflation in 2023/24.

Against this backdrop, how much annual funding foundations give is only part of the picture. To maximise their positive impact, foundations need to consider all the tools at their disposal – both individually and collectively.

Influencing the wider context

Foundations alone cannot solve the voluntary sector funding crisis. Recognising this, many are considering how they can influence the wider context - in particular, the public policy and spending choices that contribute to many of the issues charities are dealing with.

Foundations often seek to do this through their grant-making, for example by prioritising grants for systems change work. Some also use their own voice to engage directly with policy issues. 

Foundations can also use their collective voice through philanthropic infrastructure like ACF. As well as working to sustain a landscape where foundations can thrive, such as by demonstrating how foundation giving could be further increased, we are members of the Civil Society Group, who collaborate to influence policy on behalf of the wider voluntary and community sector. For example, the group has urged the government to increase funding for the voluntary sector through the spending review and budget process.