A jigsaw puzzle: why local infrastructure needs sustainable funding

October 6, 2026

Local infrastructure directly benefits frontline VCSE organisations, helping them strengthen their work and support more volunteering. Local infrastructure organisations provide trusted leadership, advocate for the VCSE sector and ensure smaller and marginalised groups are heard, drawing on deep knowledge of their communities and strong long-term local relationships.

‍

Communities benefit from stronger frontline organisations, while statutory bodies gain a better understanding of local needs to inform commissioning and policy decisions. Local infrastructure organisations (LIOs) act as a bridge between the voluntary sector and public bodies, supporting open and honest communication, particularly around funding and commissioning.

‍

Research by DCMS showed that effective infrastructure isn’t defined by organisational structure, but by relationships, trust, collaboration and shared purpose. Strong local infrastructure connects communities, public services and voluntary organisations, helping them work together to support communities to thrive.

‍

But these benefits depend on the right conditions. The research by DCMS highlighted the need for sufficient, consistent, flexible and long-term funding for LIOs, enabling them to build local knowledge, develop partnerships and credibility, and establish the trusted relationships that underpin effective work. Without sustainable funding, it becomes harder to deliver core functions, demonstrate impact and maintain a distinct role alongside frontline organisations.

‍

That brings us to an important piece of the puzzle: how local infrastructure is funded. This latest analysis of LIO finances shows how fragmented and uncertain funding can be, with core work often reliant on multiple sources. If we recognise the value of local infrastructure, how can we fund it in a way that enables it to deliver lasting benefits for the public sector, the VCSE sector, and communities?

‍

This report is both a reflection of what works and a call to action. For local authorities, the NHS, funders and partners, it highlights the value of investing in local infrastructure as a core part of place-based systems. For the VCSE sector, it reinforces the importance of strong, connected networks.

‍

When local infrastructure is properly resourced, we see stronger VCSE organisations, more responsive public services, and communities that feel empowered, connected and able to thrive.

‍

LIO funding is fragmented, insecure and highly variable

‍

There is no consistent funding model for local infrastructure. Some LIOs have access to significant investment from multiple sources, while others are operating with very limited dedicated funding. This means that LIOs are often piecing together multiple small grants and contracts simply to sustain their core work.

‍

On average, LIOs have 2.4 different sources of funding for local infrastructure, with some relying on as many as nine, others none at all. Some LIOs are reliant on a single source for infrastructure funding, meaning they are at risk if that funding is lost. This patchwork can make it difficult to plan ahead, retain staff and invest in developing services. It can also mean that organisations spend significant time managing multiple funding relationships and reporting requirements, rather than investing that time in the relationships and work that the VCSE sector and communities need.

‍

Short-term funding creates long-term uncertainty

‍

The research found that 53% of infrastructure funding is awarded for just one year. For LIOs, whose work is fundamentally about building long-term relationships, trust and knowledge of place, short-term funding can be particularly challenging. Relationships with communities, voluntary organisations, councils, health partners and other local institutions take time to develop. Facing a cliff edge in funding every 12 months is not a sustainable way to provide effective infrastructure services.

‍

The pressures are becoming increasingly visible. Half of NAVCA members recorded a deficit in 2024–25, with many organisations increasingly relying on reserves to maintain their work.

‍

The demand for infrastructure continues to rise

‍

Despite these pressures, the demand for local infrastructure services continues to increase. 89% expect to deliver the same or higher levels of infrastructure support in 2026–27. This is a testament to the commitment and resilience of organisations across the NAVCA network, but it also raises a difficult question about sustainability – we cannot assume that organisations can continue doing more with less indefinitely.

‍

The data shows a clear relationship between funding security and the ability to sustain and grow infrastructure services. The LIOs expecting to deliver higher levels of infrastructure services in 2026–27 all had more than £100,000 of infrastructure funding, usually from multiple sources. Most also had funding agreements lasting two, three or five years. Ultimately, longer-term, more sustainable funding creates the conditions for organisations to invest, develop and build on what they already do well.

‍

The funding gap is growing for some LIOs

‍

The picture is particularly concerning for organisations operating with very low levels of dedicated infrastructure funding. The number of LIOs with less than £50,000 income for infrastructure increased from eight in 2022–23 to 12 in 2025–26. If no further funding is confirmed, this could rise to 20 in 2026–27. At these levels, organisations can struggle to sustain the breadth and quality of infrastructure support that their local VCSE sector needs.

‍

There is a risk of a downward spiral: limited funding reduces capacity, reduced capacity affects the quality and extent of delivery, and organisations have less opportunity to invest in developing new relationships, partnerships and sources of income.

‍

At the other end of the picture, some LIOs have been able to build a more positive cycle, securing longer-term and multiple sources of investment that allow them to strengthen their infrastructure offer and develop new opportunities.

‍

The funding model can therefore shape the trajectory of an organisation – creating either a virtuous or vicious cycle.

‍

Completing the jigsaw

‍

The answer is not simply more funding from a particular source. It is about recognising local infrastructure as an essential part of the system and funding it accordingly. That means moving away from a model based primarily on small, short-term and fragmented funding towards sustainable investment that reflects the long-term nature and commitment of infrastructure to place.

‍

It means recognising the role LIOs play in strengthening the VCSE sector, connecting communities with decision-makers, building partnerships and providing the local knowledge and relationships that public services increasingly need.

‍

At a time of significant change – from devolution and local government reorganisation to neighbourhood health and growing pressure on public services – strong, trusted local relationships and a strong VCSE sector matter more, not less.

‍

The evidence is clear: LIOs are continuing to deliver despite significant financial pressures. But resilience should not be mistaken for sustainability. If we want strong VCSE organisations, connected communities and effective partnerships with public services, we need to invest in the infrastructure that makes those things possible.

‍

Download the full jigsaw report here: https://www.navca.org.uk/research-reports-and-publications

‍