The marketisation of charities in England and Wales

Much has been written about the reasons for and impact of marketisation on charities, their clients, and wider civil society. A central component of the marketisation thesis is that charities are substituting grants and donations with commercial revenue. However there is no consensus in the existing literature as to whether the two sources of revenue are substitutes or complementary. This paper shows that between 2003 and 2007 there was a significant increase in the proportion of overall revenue attracted from commercial sources by charities in England and Wales. Using our preferred Generalised Method of Moments (GMM) estimation model we show that the annual persistence of commercial revenue over time was 44%. In particular, a +10% change in grants and donations was associated with a -3.1% change in commercial revenue. Thus commercial revenue is an inelastic substitute for grants and donations. We therefore conclude that charities are succumbing to market forces