Charities and public services are more vulnerable to the Covid-19 crisis than was previously thought because of the squeeze on funding the former is experiencing as a result of the pandemic, study shows.

New research by charity think-tank NPC has revealed that 54% of charities surveyed delivered public sector contracts and 59% of these said they are cross-subsidising that contract with money from other sources such as fundraising.

However, due to the cancellation of many fundraising events and the closure of charity shops due to the coronavirus outbreak, charities are going to struggle to find the funds to deliver on their public sector commitments, NPC warns.

NCVO, a body representing the voluntary sector, reports that charities are set to lose more than £4bn over a 12-week period.

NPC’s State of the Sector 2020 report also found that charities are doing more in almost every area than 2017 and so may have been spread thinly when the crisis hit. In 2017, for example, 83% of charities said they were delivering services or products. In 2019/20 this rose to 89%.

Less than half (47%) of the 300 charities approached for the research - which was funded by PwC, Barrow Cadbury Trust, Lloyds Bank Foundation and Odgers Berndtson - believed that independent funders offered the flexible core funding which NPC expects will be vital to keeping them afloat in the crisis.

Charities’ confidence on their ability to use digital technology has dropped by 11% to 59% from 70% since 2017. This may leave them struggling to shift services online to reach isolated people during quarantine and social isolation, according to NPC.

‘Charities are mobilising to help thousands of people across the country but they are also crying out for more help and support. Their income is collapsing just as people’s need to use them starts to grow,’ said NPC CEO Dan Corry.

‘Our research reveals some underlying problems in the sector which the crisis will undoubtedly exacerbate. The response both from policymakers and the sector to the crisis needs to take this pre-existing weaknesses into account, and make sure issues like the lack of core funding, the weaknesses on using digital technology and the cross subsidy of contracts are not overlooked, or we could see charities fail and thousands of vulnerable people put at risk.’