Fears over the economy are placing charities under financial pressure, with slower growth in income and legacies, according to a new report by academics at the Cass Business School , London.

A new report, Charity Market Monitor (CMM), found evidence that most sources of income to major charities are already under strain from the current economic environment.

The real annual income growth of the UK’s largest fundraising charities was down to 1.2% in 2006-2007. Income from earned sources grew more slowly than donations. The report also pointed to record lows in the growth of legacy donations, which is especially challenging for some major charities which may obtain 25% of their income through the transfer of wealth between generations.

Professor Cathy Pharoah, editor of CMM and co-director of the ESRC  Research Centre for Charitable Giving and Philanthropy at the Cass Business School, said, “The most important implication of the downturn in the economy is that charities should review and adapt their funding strategy in the light of the current trends to assess strengths, risks and opportunities. They will need to persuade donors to continue to prioritise charitable giving, through clear information on need, effectiveness, impact, and the potential effects of recession on beneficiaries.”

CMM 2008 is a collaboration between Cass and CaritasData, and aims to provide the clear information that is required by the sector. It is published in two volumes. The first, now available, focuses on the funding of charities which fundraise; the second, to be published in autumn 2008, will focus on corporate and charitable trust funders.

Pharoah told Philanthropy UK, “There is a gap in the information available about trends in private philanthropy. We cannot do our job properly if we don’t have data on voluntary private donations. The best way to obtain this is to track the finances of the charities who raise the most money through philanthropy, along with reviewing what companies, trusts and individuals say they have given at source.”

• A subscription to both volumes of Charity Market Monitor 2008 can be purchased for £350 (charities: £175) from CaritasData.