Almost 700 UK charities at high risk of insolvency, new research finds

New research conducted in partnership with Tech City labs reveals the driving risks impacting the sector

688 charities in the UK are currently at a high risk of insolvency, according to new research from leading business advisory firm FRP and data intelligence agency Tech City Labs.

The findings come from an AI-driven review of nearly 185,000 active UK charities that was carried out by the two firms, who have entered into a partnership designed to help charity trustees spot the early warning signs of distress.

FRP Advisory is one of the UK’s largest independent business advisory firms and supports businesses across the country in areas including corporate restructuring, where it has supported a broad range of charities as well as major brands including The Body Shop, Debenhams and Clintons. Tech City Labs is a full-service data agency which provides businesses with insights to help inform their corporate decision making.

The power of AI however now means we’re in a position to spot the signs of distress much earlier and help charities address cashflow challenges and positively review their operations to protect jobs and keep their vital services running.

Philip Reynolds Partner Restructuring Advisory

As well as highlighting the high volume of UK charities at risk, the study also identified the key risk factors impacting charities. Most significant among these were negative working capital, severe liquidity pressures and long-term declines in income, as rising operational costs and the ongoing impact of the cost-of-living crisis on funding continue to affect charities.

The data was extracted from thousands of annual reports and filings from these charities, which Tech City Labs analysed using an AI large-language model to flag legal, behavioural and payment‑stress issues. This process saved several weeks of manual review and will enable trustees to conduct real-time monitoring to help flag new risks as soon as they appear.

Phil Reynolds, Partner at FRP Advisory, said: “There are a wealth of challenges facing charities right now – not least rising costs and the sustained impact of the cost-of-living crisis on funding at a time when demand for their services is only increasing.

“The power of AI however, now means we’re in a position to spot the signs of distress much earlier and help charities address cashflow challenges and positively review their operations to protect jobs and keep their vital services running.

“Our work on Relate, which saved 185 roles and counselling services nationwide, shows what timely data like this can help to achieve, which is why we were keen to work with Tech City Labs to highlight the risks that the third sector is currently facing.”

Benjamin Sims, Managing Director at Tech City Labs, added: “We’re committed to providing firms with everything they need to know, and we combine access to huge volumes of dark data with a technology platform that processes millions of data points instantly in order to achieve this.

“By marrying our technology with FRP’s expertise in the third sector, we can help UK charities navigate the issues they’re currently facing and provide support so they can continue to carry out their important work.”