ICSM Insolvency News: how some charities collapse into administration leaving their suppliers unpaid and staff sacked (and in one case blow the income on luxury spas)

By Harry Mottram: Charities are no different from businesses – some are tiny and run by volunteers, some large run by paid staff while others are vast international concerns. Nearly all rely on grants, donations and income generated by a range of commercial activities while others may have the luxury of previous bequests and financial trusts which guarantee a regular income. And the one thing they all have in common with businesses is they can go bust or fall into administration.

The reasons why charities become insolvent are no different from commercial outfits with a falling income, increased overheads and running costs, the loss of a major revenue stream such as a grant and mismanagement. That was certainly the case of London based Fashion for Relief run in part by model Naomi Cambell which raised nearly £4.8m in five years but only passed on a fraction of that amount to save the Children with 90% of its income spent on luxury hotel stays, cigarettes and spa visits for the trustees. It was wound up in 2024 with Cambell banned from being a director of a charity for five years following the scandal while several of the suppliers for its lavish fashion events were left unpaid.

The Charity Commission said this year there had been a rise on 27.7% of charities finding themselves in financial difficulties noting 41% of charities spent more than they earned last financial year, and a quarter had incomes of less than £10K. In contrast the UK’s largest charities have incomes that run into billions – and millions in many more cases. Save the Children International had a turnover in 2024 of £1,103,536,563, while Nuffield Health and the University of Edinburgh all have higher incomes and like Save the Children, employ thousands of staff. There are some charities like the National Trust that have far more volunteers than staff who rely on their visitors and members, while Cancer Research and The British Heart Foundation have thousands of volunteers to run their charity shops as well as very well-paid CEOs. Those charity shops have become increasingly under pressure with The British Heart Foundation planning to close 150 of their 600 stores as profits fall and overheads rise – much to the frustration of the volunteers that staff them since the charity’s CEO earns £268,239 a year.

^{Hestercombe House in Somerset is in administration}

In contrast Hestercombe Gardens near Taunton in Somerset, run by a charitable trust, is in administration as joint administrators Mark Boughey and Rebecca Dacre, of Forvis Mazars seek to find a way of keeping the nationally important 50 acre gardens and house afloat. Unlike the National Trust which owns hundreds of properties Hestercombe is a one off but like all stately homes and gardens has massive overheads just to keep the property and grounds in good order. Without huge grants or a Hollywood movie being filmed there and thus creating an increase in footfall paying all the bills is incredibly difficult – so no surprise the historic property is in trouble. The main thing in Hestercombe’s case is the attraction remains open to the public – and with its shop and café at least generates a steady income even if many of the staff are volunteers.

This year the research and development charity Audience Agency (TAA) was placed into liquidation on 10 September, with Simon Farr and Tom Bowes of FRP Advisory Trading Limited appointed joint liquidators. It had a deficit of nearly £475,000 after the Arts Council cut funding. And cuts to grants is one of the biggest blows the largest charities can suffer leading to a collapse. Take for instance the charity Safer Communities Scotland which had its more than quarter of a million pounds grant cut in half last hear and axed this year which will see it cease activities this autumn. Without a range of other subsidies charities that rely on one source of income are vulnerable. The main argument for outsourcing work to charities is that it is significantly more cost-effective and flexible, and of course can be quickly axed to save money.

^{Ian Carrotte of ICSM} 

Ian Carrotte of ICSM said that sadly when it comes to insolvency charities are not (excuse the pun) not charities. He noted that this summer the deaf children’s charity Auditory Verbal in Bicester, went into liquidation in May, leaving the 30 staff without a job and creditors owed £433,557. That’s small change when it comes to some colleges and private schools that are registered as charities with some like the Clitheroe based Moorland Private School that closed with debts of £1.7m, including £500,000 owed to HMRC and £700,000 to Barclays – and £6,000 in unpaid invoices to the local electrician.

The ICSM CEO said suppliers to charities should treat them like any business client and not to allow the lame excuses over late payment to cloud their judgement. He said that some charities will play the sympathy card when things are tight financially but it is important for suppliers so stick to their terms of credit rather than end up with unpaid invoices.

The main image is a still from a TikTok video explaining the case of Naomi Cambell's charity

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• Email the CEO: Ian.carrotte@icsmcredit.com and request to recieve the ICSM newsletter which lists firms that are in trouble
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