Scottish charities are facing increasing pressure as delays in funding create cash flow problems, force services to be postponed or cancelled, and leave organisations drawing heavily on already stretched reserves.
New findings from the Scottish Third Sector Tracker show a sector that remains committed to supporting communities, but one that is under mounting strain from financial instability, workforce pressures and uncertainty.
The research reveals that more than a quarter of organisations, 28%, now cite delays or reductions in funding as one of their most significant challenges.
Charities say these delays are creating immediate cash flow pressures, forcing organisations to dip into reserves and making it harder to plan or sustain services.
The tracker found that 58% of organisations now hold less than six months’ reserves, an increase of five per cent since Spring 2025, while 57% say their current use of reserves is unsustainable, up sharply from 40% in Autumn 2024.
Around 60% to 65% of organisations experiencing funding delays report immediate cash flow pressures, 45% to 50% say they have been forced to draw on reserves, and between 35% and 40% have had to postpone or cancel services.
Beyond finances, the research highlights a significant impact on staff morale, wellbeing and retention, with uncertainty around contract renewals, redundancy risks and the inability to plan long term contributing to anxiety and the loss of experienced staff.
The Scottish Council for Voluntary Organisations has said that reliable, multi year funding linked to inflation is now essential if the sector is to remain sustainable.
Steve Grozier, Research Officer at SCVO, said:
“This latest wave of Scottish Third Sector Tracker reveals a sector that continues to show resilience and adaptability, but one that is increasingly stretched across multiple fronts.
“Service delivery remains broadly stable, yet over half of organisations report that limitations in resources, skills, or capacity are hindering their ability to meet demand.
“Financial pressures have intensified.
“Staff recruitment and retention remain difficult for many organisations.
“Volunteer recruitment and retention challenges remain acute.
“Funding delays have now also emerged as a major challenge.
“The work being done by organisations across the sector in the midst of these issues is commendable.”
Respondents to the survey consistently highlighted secure, multi year, inflation linked funding for core costs and staff salaries as the single most important factor that would allow organisations to do more.
Without changes to public sector funding models, investment in workforce capacity and improved partnership working, the research warns that organisations may struggle to meet rising demand or sustain essential services.
The findings come ahead of a hustings of candidates for the 2026 Scottish Parliamentary elections at SCVO’s flagship event, The Gathering, on 10 February.
SCVO has also published its manifesto, Scotland’s Essential Sector, calling on the next Scottish Government to deliver Fair Funding and reform how voluntary organisations are funded.
Anna Fowlie, SCVO Chief Executive, added:
“Scotland’s charities, community organisations and social enterprises are a fundamental cornerstone of our society and economy.
“This research shows a growing fragility which is detrimental to us all.
“It’s time to give these organisations, and the people they serve, the respect and stability that they need.
“The next Scottish Government needs to implement Fair Funding as a matter of urgency.”
