Academics at De Montfort University have exposed the devastating impact of funding gaps on third-sector organisations (TSOs) helping those furthest from the labour market into work, education or training.

Professor Jonathan Payne and Dr Peter Butler of the university’s People, Organisations and Work Institute (POWI) and Dr Jonathan Rose collaborated with the Employment Related Services Association (ERSA) to collect survey responses from 64 TSOs and conducted in-depth interviews with ten providers.

The researchers found that 74% of survey respondents had experienced a reduction in funding. Over half of respondents (59%) explained that they had experienced “very significant” reductions in funding since access to the EU’s European Social Fund (ESF) ended. Around four in 10 respondent organisations had laid off staff in the last year, and almost 15% considered their organisation to be under threat of closure in the next 12 months.

TSOs provide tailored, one-to-one support for individuals with multiple barriers to progress towards positive outcomes and improve their self-confidence and well-being, with many benefitting from ESF funding. While this funding has nominally been replaced by the UK Shared Prosperity Fund (UKSPF), the amounts on offer are significantly reduced, and funding being made available for ‘people and skills’ priorities’ has been delayed.

Exacerbating this are concerns that some cash-strapped local authorities are now using UKSPF to support their own non-specialist in-house services in order to preserve jobs.

The funding environment has also become more fragmented, with third-sector providers required to make multiple funding bids to different local authorities for relatively small pots of short-term funding, typically of 12 months or less. Many TSOs regard this as inefficient, diverting resources from supporting users. It also makes long-term planning extremely difficult for providers and makes it harder to recruit and keep knowledgeable key workers. Short-term funding also makes it harder to meet the needs of vulnerable users who require long-term support.

Providers are also deeply concerned about uncertainty surrounding what will happen when UKSPF ends on March 31, 2025.

Prof. Payne commented: “The third-sector plays a vital role in supporting some of the most vulnerable in society to take the steps needed to progress towards jobs or training that they want to do and which fits with their life circumstances. It is vital that government acts quickly to provide clarity on the future of UKSPF to avoid another cliff edge occurring next March and puts in place long-term funding that can stabilise the sector and prevent the further loss of experienced support workers.”

He added: “Both the Conservatives and Labour have expressed their desire to support more individuals who are currently claiming Personal Independence Payment to return to the workforce. Both have to work out how much they value third-sector intervention in this area, which studies show is “what works”, and what they envisage the contribution of the sector will be in the future.”

Elizabeth Taylor, ERSA’s CEO, commented: “UKSPF has failed to replace the funding that came from Europe for employment support. Projects that delivered employment support services for those most disadvantaged in the labour market have diminished, the impact of this is bad for people, employers, the economy, and local communities. There must be an extension of the current UKSPF allocation, and clear guidelines for people and skills going forward. Let’s fix this for the future of Britain’s workforce and local economies.”

The report can be accessed here.