What new national data tells us about funding, contracts and financial wellbeing
Complimenting our local Leeds State of the sector, New national, findings from Third Sector Trends 2025 offers a detailed and reliable national picture of how voluntary, community and social enterprise (VCSE) organisations across England and Wales are funding their work, how this has changed over time.
New national findings from Third Sector Trends 2025 offer one of the most detailed and reliable pictures available of how voluntary, community and social enterprise (VCSE) organisations across England and Wales are funding their work, how this has changed over time, and how organisations are experiencing their current financial position.
The latest report — Third Sector Trends in England and Wales 2025: income sources, assets and financial wellbeing — is based on 8,680 survey responses and forms part of the only large-scale, fully representative longitudinal study of the sector in the UK. The research has tracked trends every three years since 2010, allowing for robust comparison across time, geography and organisational type.
While the findings are not Leeds-specific, they provide important context for VCSE organisations, infrastructure bodies, funders and system partners seeking to understand current pressures and longer-term shifts in the sector.
Forum Central takes part in regularly keeping a track on local Leeds based trends. This is deliver in two ways. The first is the State of the Sector, which is co-funded and co-produced by Forum Central (Volition) and Voluntary Action Leeds, and prepared by Nifty Sustainability CIC in collaboration with MyCake. The second way Forum Central (Volition) helps to connect to the bigger picture is by running a Leeds based survey on how the sector behaves every six months. This report, the Cost Pressure Survey, pulls together the pressures many organisations face in Leeds. By committing to this more frequently, its a great way to track pressures as they come.
Grants are becoming more important — not less
One of the clearest messages from the data is a continued shift away from older policy narratives around “grant dependency”.
The research shows that grants are now viewed as an increasingly important source of income by voluntary organisations, relative to other income streams. Time-series analysis indicates that perceptions of the value of grant funding have risen since 2010, while the perceived importance of income from delivering public service contracts has fallen sharply since 2022.
At the same time:
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Income from subscriptions and investments has rebounded in recent years
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Earned income and in-kind support have remained relatively stable
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Social investment and loan finance remain marginal for most organisations, with interest declining further in 2025
This reinforces what many organisations already experience in practice: while mixed income models are common, grants remain a critical underpinning of financial sustainability, particularly where activities are preventative, community-based or focused on people with higher levels of need.
Trusts and foundations are shifting their approach
The report also tracks changes in relationships between voluntary organisations and grant-making trusts and foundations, comparing responses from 2019, 2022 and 2025.
Encouragingly, the data suggests a gradual shift towards more supportive and longer-term funding practices:
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40% of organisations now report that grant-makers are making a long-term investment in their work, up from around 31–32% before and during the pandemic
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Access to unrestricted or core funding rose significantly during the pandemic and, while it has eased slightly since, remains higher than pre-pandemic levels
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Support for organisational skills and development has recovered after dipping during Covid-19
However, the findings also point to renewed pressure around expectations of “innovation”, which had reduced during the pandemic but are now rising again. As funders re-establish priorities, this may create tension for organisations focused on delivering essential, ongoing support rather than constant programme redesign.
As Tony Chapman, who leads the study at St Chad’s College, Durham University, notes, this balance between stability and innovation remains a critical issue for the sector.
A continued retreat from public service contracts
Despite sustained political interest in involving voluntary organisations in the delivery of public services, the research shows a continued decline in sector engagement with contract delivery.
Among larger organisations, participation in public service contracts has fallen from 64% before the pandemic to 50% in 2025. Importantly, the data suggests this is no longer driven by uncertainty or lack of information. Instead, there is a growing and more settled resistance to contract working.
The main reasons cited include:
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Contract values that do not cover the true cost of delivery
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Rising staffing costs, including increases to the National Minimum Wage and employers’ National Insurance contributions
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Recruitment and retention challenges
This has implications not just for VCSE organisations, but for commissioners and system partners who rely on voluntary sector expertise, trust and reach. The findings suggest that without changes to commissioning models, continued disengagement is likely.
Read the Leeds State of the Sector Report to see how the local and national reports compare.
Trading income is weakening, especially among newer organisations
While around 60% of voluntary organisations still generate some income through trading or contracts, the overall appeal and reliance on trading income is declining.
The proportion of organisations earning the majority of their income from trading has not returned to pre-pandemic levels, and newer organisations are significantly less likely to rely on trading than those established earlier in the 20th century.
This challenges assumptions that social enterprise models alone can compensate for reduced grant funding, particularly in areas where markets are weak or demand is limited.
Financial reserves: stability with inequality beneath the surface
Headline findings suggest that third sector finances have held up reasonably well since 2022, with 82% of organisations holding some level of reserves.
However, the detail reveals significant variation:
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Micro organisations are far less likely to hold reserves than larger bodies
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Over a quarter of organisations have drawn on reserves to cover essential costs such as rent and wages
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Organisations in less affluent areas are more likely to use reserves for survival rather than development
Notably, the proportion of organisations using reserves for essential costs has remained remarkably consistent since 2013. This suggests that financial stress is a persistent feature of the sector, even if the specific organisations affected change over time.
Outlook: cautious realism rather than optimism
When asked about future financial prospects, optimism has declined again in 2025. Only 28% of organisations expect income to rise over the next two years, down from a peak of 36% in 2019.
While expectations have often outpaced reality historically, the proportion of organisations that actually achieved income growth has increased steadily since 2010. This points to a sector that is realistic, adaptive, and accustomed to operating under constraint.
As Professor Chapman concludes, external pressures matter — but competition for limited resources is an enduring structural feature of the sector.
Why this matters locally
For Leeds VCSE organisations and partners, this research offers valuable national context for conversations about:
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Funding sustainability and income mix
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The limits of contract-based delivery models
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The importance of core funding and long-term investment
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How financial pressure is distributed unevenly across places and organisations
It reinforces the need for approaches that recognise the realities of delivery, cost, and capacity — particularly as demand on the sector continues to grow.
About the research
Third Sector Trends is the UK’s largest and longest-running empirical study of the voluntary sector. The project is supported by Community Foundation North East, Lloyds Bank Foundation England and Wales, Wales Council for Voluntary Action and Millfield House Foundation.
Further thematic reports will be published over the coming months.
