UK charities are considering redundancies in the year ahead as rising operational costs outpace funding, a new study from Rathbones, one of the UK’s charity wealth managers, shows.

The survey of senior executives at charities with a collective £5 billion of equity investments found almost all (99%) say current funding levels do not match costs.

Nearly one in 10 (9%) warn they are operating at a deficit, while a further 81% are eating into their reserves to maintain services with another 9% saying the funding squeeze means margins are tight.

Rathbones research found charities are considering a range of actions to manage the pressure, with half (49%) considering redundancies in the year ahead and 44% planning not to replace staff who leave. More than two out of five (44%) are considering selling assets such as property to boost income, while more than a third (35%) are considering cutting back or closing services they provide.

Around 40% say they are considering stopping stock market investments to ease the financial pressure, despite the Rathbones study showing charities are benefiting from investment growth.

More than four out of five (84%) have seen the value of their stock market investments grow in the past year including half (42%) who have seen growth of more than 10% during the period. Almost all (98%) surveyed say their investment portfolio delivers enough income.

Three out of four (75%) respondents say total income received by their charity has dropped in the last 12 months, with 37% saying income has fallen by more than a fifth over the period.

There are some grounds for optimism – around three out of four who say income has fallen in the past two years believe it will recover to previous levels within 12 months. However, 6% say the recovery will take more than a year.

The fall in income has already had a major impact. Nearly half (47%) of charity executives questioned said their organisation has reduced headcount voluntarily in the past two years, while 45% said they had been forced into redundancies. Nearly two out of five (39%) have cut services and half (48%) have sold assets such as property to help generate income.

Charities are under acute pressure as rising costs and weaker income force difficult decisions about staffing, services and the use of reserves. The fact that so many organisations are considering redundancies or selling assets underlines the scale of the challenge facing the sector.

While there are signs of optimism that income may recover, this research shows how important it is for charities to have a long-term financial strategy. For those with investible assets, well-managed portfolios can play an important role in supporting resilience, helping charities generate income and continue delivering for the communities they serve.