Foundations, Giving, Philanthropy, Research, Trends

Foundations essential to creating civil society

New results showing that grant-making by the UK’s Top 300 foundations reached a record £3.3 billion in 2016/7 – despite the unpredictable economic environment – offer some reassurance to civil society. In a fourth continuous year of positive growth, grants grew by almost 11%.

The value of foundation grants goes well beyond monetary worth. Foundations are an integral multi-faceted part of civil society – they can express the donor’s philanthropic aspirations, support the thousands of front-line organisations meeting essential social needs on the ground, or initiate and lead longer-term social change by themselves or as key partners.

The role of civil society initiatives continues to grow, while statutory funding support steadily declines. Foundations are a source of the sustainable and flexible funding which organisations need in a changing environment where new demands are opening up faster than they can be met.

Foundations’ own finances are therefore of great significance. Their spending increase in 2016/17 was fuelled by two big factors. One was a growth in income from foundations’ assets, which represent three-fifths of the total assets of the UK charity sector and reached a record £65 billion in value.

An asset base is a critical success factor for resilience. It also enables flexible use of resources in ways that respond best to emerging needs and priorities. Over the last few years we have seen some foundations drawing on total capital returns as well as income from investments to maintain or increase their spending, and total Top 300 spending in 2016/17 was £4.5 billion, against annual income of £3.7 billion.

The second big factor contributing to high grant levels was new donations into foundations, worth £1.8 billion in 2016/17. These can boost endowments and assets, and generate new annual income over time, such as the huge gift of shares in Redrow plc worth over £202 million to the Steve Morgan Foundation by its eponymous founder. Alternatively they can fund annual spending, and help enable major new investments in universities, art galleries, museums, and the buildings needed to improve health and social care delivery, such as the Wolfson Foundation’s support for hospices.

New giving went mainly to mainly existing foundations, and we should not see this year’s results as heralding a new age of growth – some of this only balances out the foundations which are spending our and exiting.  Many foundations are anxious about the uncertainties in the financial and social environment, increasingly cautious and concerned about how best to allocate resources. This may lead to an increasingly strategic focus, such as on social justice – for example, the Resolution Trust’s focus on poverty or the place-based grant-making which has arisen partly in response to the social divisions revealed by the ripples of Brexit.

These forces will put increasing pressure on foundations themsleves and on the organisations seeking funding support. One of the best ways we can strengthen civil society for the future is to encourage more wealthy people to set up foundations and continue to build the sector’s independent asset base.