Across the UK, charities are facing what many describe as a perfect storm.

Demand for services is rising sharply. Costs continue to climb. And yet funding is becoming harder, not easier to secure. For many organisations, particularly smaller and community-based charities, the challenge isn’t a lack of impact or ambition. It’s a funding landscape that no longer works in the way it once did.

Understanding what’s changed and why is an important step towards building more sustainable ways of supporting good causes.

Charities are operating in a context shaped by multiple, overlapping pressures. Economic uncertainty, increased need within communities, and long-standing structural issues in funding models are all colliding at once.

What this means in practice is that even well-run, high-impact organisations are finding it harder to secure the resources they need to plan confidently and deliver consistently.

So what’s actually happening?

Grants remain a vital source of income for many charities, but they are more competitive than ever.

Many funds are oversubscribed, highly restricted, or focused on narrow outcomes that don’t always reflect the realities of day-to-day service delivery. Core costs such as staff time, utilities, rent, and digital infrastructure are frequently excluded, despite being essential to achieving any charitable impact.

For charities, this can mean reshaping services to fit funding criteria, rather than funding supporting the work communities actually need.

The cost-of-living crisis hasn’t only affected charities, it has affected their supporters too.

Individuals and businesses are being asked to give more, more often, at a time when many are facing financial pressure themselves. While individual giving hasn’t disappeared, it has become less predictable, and one-off donations are increasingly difficult to rely on as a sustainable income source.

For charities, this creates uncertainty and makes long-term planning far more challenging.

At the same time as funding becomes harder to secure, demand for charitable services continues to rise.

Charities are supporting people affected by the cost-of-living crisis, stretched public services, and growing inequality, often stepping in where other systems fall short. This places additional pressure on teams that are already operating with limited capacity and resources.

Many organisations are doing more than ever before, with less certainty about how that work will be funded.

One of the most overlooked challenges facing charities is time.

Applying for funding is often resource-heavy, involving lengthy application forms, detailed monitoring requirements, and uncertain outcomes. For small teams, this can mean making difficult choices between delivering frontline services and spending hours chasing funding that may never materialise.

In this context, time becomes just as limited and just as valuable as money.

Funding challenges aren’t just a financial issue. They affect every part of an organisation.

Unstable or overly restricted funding can impact:

• Staff wellbeing and retention

• Long-term planning and investment

• The ability to respond quickly to changing community needs

• Confidence in organisational sustainability

In some cases, vital services are reduced or paused, not because they aren’t needed, but because the funding model doesn’t support them.

Against this backdrop, many charities are rethinking what effective, sustainable funding looks like.

Increasingly, organisations are seeking:

• Unrestricted funding that allows flexibility

• Reliable, repeat income, even at a modest level

• Low-admin opportunities that don’t drain already-stretched capacity

• Partnership-based approaches rather than one-off transactions

Above all, charities are looking for funding that trusts them, trusts their understanding of their communities, and gives them the space to respond to real needs as they arise.

In response to these pressures, some charities are beginning to explore funding models designed to complement traditional grants and donations, rather than replace them.

Approaches like our GivingLottery offer charities a way to build a small but regular income stream, without the heavy administration often associated with fundraising. With minimal setup and built-in marketing support, it can help organisations generate unrestricted funds that support day-to-day running costs — the things that are often hardest to fund.

Similarly, our Community Grants are designed to reduce barriers rather than add them. By focusing on storytelling over reporting, and offering quick decisions and unrestricted funding, they aim to support smaller charities that may not have the time or capacity to navigate complex application processes.

These kinds of approaches recognise a simple truth: sustainable funding doesn’t have to be complicated to be effective.

Charities don’t exist in isolation.

When funding systems fail to reflect reality, communities feel the consequences through reduced services, longer waiting times, and unmet need. Understanding the pressures charities face isn’t about placing blame or expressing sympathy. It’s about recognising that the way we fund good causes needs to evolve.

Because the question isn’t whether charities are working hard enough.

It’s whether the funding landscape is working well enough for them.

If we want charities of all sizes to be there when communities need them most, that’s a question worth taking seriously.