Introduction to the non profit sector

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This section addresses some of the key questions you may be asking if you are new to the non profit sector:

• What is the non profit sector?
• Where does it fit in society?
• How big is it?
• In what areas of activity is it involved?
• What’s been happening to the sector in recent years?
• Looking forward, what’s expected to happen to the sector?

What is the non profit sector?

The purpose of the  non profit sector is to improve  and enrich society.

It exists to create social wealth rather than material wealth.

It is sometimes referred to as civil society, the third sector, the Voluntary and Community Sector (VCS), the not-for-profit sector, the charity sector, the social sector and even the beyond profit sector. It is made up of many different categories of activity affecting many aspects of society. The various terms are used by different people to include different combinations of activity which can be confusing.

The common understanding behind our categorisation of the sector is that it exists to make a difference to society rather than to make financial profits.

Where does it fit in society?

The term, the third sector, indicates its positioning; that is it sits between government (the public sector) and the private or commercial sector.

The three sections of society

Government/public sector

Where taxation revenues, from companies and individuals, are used to fund the legislature and to provide a basic range of services (the welfare state) in areas such as health education, social welfare.

The non profit/third sector/civil society

Home to general charities, trades unions, social enterprises,public arts organisations, community interest, companies,voluntary and community organisations, independent schools, faith groups, housing associations, friendly societies, mutual societies which broadly exist 'for public benefit' and are therefore eligible for a range of income and property tax exemptions.

The private or commercial sector

Where goods and services are produced and traded to make a profit in which surpluses which do not need to be kept in the business are distributed to owners and shareholders and which pay taxation towards funding the activities of the government sector.

There is a circular dynamic between all three sectors - as shown in the diagram, which operates best when each is sustainable and effective. It is a fact of life that social wealth creation requires material wealth creation for its existence.

How big is the non profit sector?

The answer depends on which groups are included in any definition. Working on the statistics from NCVO’s latest Civil Society Almanac, possibly the most widely used and accepted, there are 171,074 voluntary organisations in the United Kingdom.

The table below illustrates the spread of organisations in terms of size and income:

So, the largest number of organisations are tiny ones with income of less than £10,000. The biggest organisations are the smallest proportion but by far the largest in terms of the proportion of income they represent. Total income for the sector is in the region of £35,498 million based on 2007/8 values.

In 2008 there were 668,000 people in paid work within the sector, of which 63 per cent were full-time employed, 37 per cent part-time and 68 per cent of the total were women and 32 per cent, men.

In the year 2008/9 NCVO estimates that 26 per cent of the UK population were formal volunteers at least once a month and this rose to 41 per cent of the population volunteering at least once a year.

In what areas of activity is the non profit sector involved?

• Culture and recreation
• Education
• Parent Teacher Associations
• Playgroups and Nurseries
• Research
• Health
• Social Welfare
• Scout groups and youth clubs
• Environment
• Community development
• Housing
• Employment and training
• Village halls
• Law and Advocay
• Grant-making
• Umbrella bodies
• International
• Religion

What’s been happening in recent years?

Since the register of charities was established in the 1960’s there has been a steady year on year increase in the number of organisations registering of not less than 2,500, according to NCVO and the Charity Commission for England and Wales.  In 2007/8, the Charity Commision reported 4,953 registrations in England and Wales.

It appears that both registrations and removals are unrelated to economic conditions. There is no reliable data on the number of mergers.

Looking forward, what is expected to happen to the sector?

Generally, the sector is anticipating a period of fairly marked austerity for the next three to five years with major cutbacks in public funding, increased competition for static or reduced grantfunding and increased competition for corporate and individual support. Demand for the services provided by the non profit sector is expected to increase.

Organisations are under pressure to work more effectively, and collaboratively.

The sector is attracting increasing numbers of young people who are working as volunteers/interns as an entry method.

Have your say

If you're new to non profits, why not join in one of the discussions and learn from people who are already working in the sector. Ask questions and share your thoughts on one of KnowHow's discussion forums.