Charities must adapt to thrive in 2025

RSM UK’s head of charities Nick Sladden highlights three critical areas where charities must adapt to thrive, or for some, simply survive in 2025:

Financial operating models - “Charities have not been insulated from the economic turbulence of recent years. Soaring energy prices, post-pandemic cost pressures, and the ongoing cost-of-living crisis have hit hard. In 2025, the challenge will intensify. The National Living Wage will rise in April, further increasing wage bills for charities already reliant on lower-paid staff and volunteers. Additionally, National Insurance rates will increase, and the threshold at which charities begin paying secondary Class 1 contributions will drop. Although the Employment Allowance will soften the blow, these changes will push financial models to the brink.

“Many charities have drained their reserves during the pandemic, so will struggle to withstand the additional financial strain. Trustees will face tough choices about staffing, service provision, and resource allocation. Without urgent financial planning and potentially new funding, we may see a wave of closures across the sector.”

Rapid technological change - “Artificial intelligence (AI) is transforming every sector, and charities cannot afford to be left behind. By the end of 2024, ChatGPT had 300 million weekly users—a staggering reflection of how quickly AI is being adopted. For charities, the potential is vast: AI can boost productivity and efficiency, helping them stretch every pound and hour further. However, success will depend on investing in AI infrastructure, training staff, and aligning AI with charities’ missions.

“Historically, charities have lagged behind in technology adoption, constrained by limited budgets, but the stakes are higher now. Failure to embrace AI could lead to inefficiencies, poorer decision-making, and missed opportunities for innovation. While the short-term costs of adopting new tech may seem steep, the long-term risks of staying stagnant are far greater. The gap will widen between charities that seize AI’s potential and those that don’t. The charities that innovate will thrive and attract more funding, while others stagnate and fall behind.”

Collaboration - “Collaboration will be key to solving the complex social challenges charities aim to address. By working together with beneficiaries, charities can avoid duplication and identify real needs. More importantly, by collaborating with funders, charities can build longer-term financial partnerships, fostering trust, innovation, and impact.

“A multi-stakeholder approach—engaging beneficiaries, funders, and potentially other charities—will unlock new insights, greater efficiency, and deeper community trust. It will also lead to more sustainable solutions and lasting partnerships, ultimately amplifying their impact. Charities that actively collaborate with funders and beneficiaries will build trust, secure stronger financial backing, and be better positioned to deliver a meaningful impact. Those that fail to embrace collaboration risk inefficiency, reduced effectiveness, and financial instability.”