One in six charities may have to close next year

Charities are "facing a crisis" with two in five fearing they may be forced to fold, according to new research.

One in six charitable organisations in the UK are braced to close next year, while around half claim they are already dipping into reserves, research by the Charities Aid Foundation (Caf) has found.

Cutbacks in Government spending and a decline in public donations were blamed for a climate in which staffing levels are being slashed and the Third Sector is unable to achieve its goals.

A total of 252 senior employees from organisations of all sizes were consulted in the study; 45 per cent said their charity would have to scale back its services in 2013.

Small and medium-sized charities are already facing spiralling losses, according to a report by Caf last month. It reported deficits of more than £300m in 2011, down £25m in four years.

Paul Rees, executive director at Caf, told i that urgent action is required: "The Government should ensure public bodies don't make disproportionate cuts to charities, and at the same time ministers should promote payroll giving and modernise the Gift Aid system so that charities can claim more tax relief on the money donated to them."

A Cabinet Office spokesman said: "We know it is a very challenging environment for charities... but the sector cannot be immune from cuts. The Government is committed to strengthening the sector through programmes such as the £10m Investment and Contract Readiness fund and the £65m Advice Services Transition Fund.

"We have introduced new ways for the sector to finance itself through Big Society Capital, capitalised with £600m, giving charities access to affordable loans and investment to grow."