State of the Sector 2026

Charities across England are navigating rising demand, increasing costs and changing funding patterns. Our State of the Sector Report explores the pressures shaping the voluntary and community sector in 2026, with a particular focus on South Yorkshire.

The Dual Crisis Facing Charities

Across England, charities are facing two simultaneous pressures. Demand for support has increased significantly as communities continue to feel the effects of the cost-of-living crisis. At the same time, inflation and rising workforce costs have reduced the real value of grants, contracts and reserves. Together, these pressures are limiting organisations’ ability to plan, invest and respond to growing need.

What the Data Tells Us

Recent sector data highlights the scale of the challenge:

• 62% of charities are operating at a deficit
• 77% report being worse off than 12 months ago
• 22.5% are using reserves to fund core costs
• Overheads for many organisations have increased by around 8.4%

Despite small increases in nominal income, inflation has reduced the purchasing power of the sector significantly.

How Organisations Are Adapting

Despite these pressures, charities across the sector are adapting. Many organisations are exploring mixed income models, social enterprise activity and stronger partnerships to create more sustainable funding approaches. Increasingly, resilience is being driven not just by new funding, but by organisations rethinking how they use their existing assets, expertise and relationships.

This blog provides a short overview of the findings. Download the full report to explore the national data, regional insights and practical responses shaping the voluntary sector in 2026.

State of the Sector Report 2026 cover – Cahoot CIC