Charities should consider mergers to fortify themselves against the financial crisis, says London-based charity think tank and consultancy New Philanthropy Capital.

In its report, What place for mergers between charities?, the company describes mergers as an important tool for making charities more effective.  It gives examples of fields where there is a compelling case for them to consider merging, including literacy programmes in schools, breast cancer research, mental health helplines, debt advice and grant-making trusts.

"There are too few mergers in the charity sector, in part because it’s a taboo subject," says the report's author, John Copps. "The most important question is not what works best for the charity, it’s what works best for all the people that charities intend to help." NPC argues that by bringing together charitable organisations that have similar missions, mergers can improve existing services and save money.

The report cites a recent Charity Commission survey that showed that 64 per cent of UK charities are concerned about the downturn, but just 3 per cent said they had considered merging. NPC also cites US research that shows the rate of mergers across large non-profit organisations, with an annual budget of $50 million and over, is just one tenth of the rate of large for-profit companies.

"Mergers are frowned on in the charity sector and are often seen as predatory or aggressive, ignoring the fact that a merger can help an organisation not only to survive, but to thrive," says Martin Brookes, NPC’s chief executive. The report also looks at duplication of effort in breast cancer charities, among others, where several national charities spend money and compete to raise funds for research, education and support.

In breast cancer research, for example, Breakthrough Breast Cancer spends more than £6 million on its cost of generating funds, and Breast Cancer Campaign spends around £4 million. They are distinct in that Breakthrough Breast Cancer funds its own research and Breast Cancer Campaign funds scientists in other institutions. But this difference is inconsequential to potential donors, it might be argued.

The report highlights how this situation has parallels with the agreement that created Cancer Research UK. This merger was driven by a desire to see progress in the fight against cancer by sharing knowledge and cutting costs. While the company has analysed the benefits of charity mergers in certain fields, it concludes that the entire sector must evaluate the benefits of pooling resources.

It would be unrealistic to expect this sector to weather the downturn unscathed. However, this week UK private bank Coutt’s Forum for Philanthropy survey showed that 87 per cent of private clients questioned plan to either increase or maintain charitable donations in 2009.