Behind the headline: why "7,000 charities close" doesn't tell the full story

A couple of articles caught my eye today, both talking about how charities are faring amidst the cuts. The figures, published in the Daily Mirror, show that 7,400 charities have closed in the last year. The Daily Mail have also written about this, and both papers suggest the closures are a blow to the big society project. 

I think we need to be careful here though. The figures are based on the Charity Commission's register of charities, and they do look at how many charities have been removed from the register. But this figure by itself is much more likely to reflect administration of the register rather than actual closures.

It's also worth pointing out that the figure of 7,400 quoted by the Daily Mirror includes subsidiary charities, which are usually excluded when analysing data from the register. The true figure is closer to 6,800 according to my copy of the register.

Many charities don't close and wind up their operations like a company would, instead they just gradually fade away, doing less and less activity. The Charity Commission has to put effort into finding out whether they are still operating (but very small or dormant for a while) or have ceased to exist and should be removed from the register. The number of removals from the register is related to the resources the Commission can put into this effort, rather than reflecting circumstances in the sector. 

The graph below shows the number of charities removed and registered per month over the last few years. You can see there are particular times when removals are high - we think these fluctuations are for administrative reasons rather than economic ones. The monthly view really emphasises the constant change on the register. (There's a longer term view on the Almanac website).

Number of charities removed and registered in England and Wales between 2000 and 2012

A couple more graphs shed a bit more light on this. The first shows the reasons why charities are removed from the register. Unfortunately these reasons don't give a lot of information on why charities close, but they do back up the idea that administrative changes are driving much of the change.

Reasons why charities were removed from the Charity Commission register between 2000 and 2012

My final graph is an attempt to account for some of the problems I've described above. This chart shows the number of removals per year, but only for charities that have had an income of over £100,000 at some point in the last ten years. 

Number of charities with a maximum income of £100,000 removed from the register each year

The results are interesting, and suggest that there may be more charities closing since the advent of the financial crisis. However, I think this chart should be treated with caution - these results may simply reflect the increase in the number of large and medium charities over that period. We also don't know how many of these charities reregistered or merged with others (reregistration is common for administrative reasons, but isn't tracked by the Charity Commission).

I'd caution against using raw administrative figures to draw conclusions about the health or otherwise of the voluntary sector. More sophisticated analysis might shed more light on what is happening, though. For me the most frustrating thing as a researcher is that we lack the tools and data to fully understand what is happening to the voluntary sector in this difficult period - though we and others are trying to address this.

And finally, we shouldn't forget about the other half of the equation - registrations. In 2011 when there were 6,800 removals from the register we've seen 6,000 new charities registered. And by August this year 3,300 new charities have been registered, with 2,600 removed from the register.

[You can find all the data used to write this blog as a Google doc]