More charities 'likely to fold' following spending review

New round of insolvencies and mergers expected when grants come to an end

An increase in charity insolvencies is likely to be one result of the public sector spending cuts expected in the coalition government's comprehensive spending review, according to one of the UK's leading charity insolvency experts.

Ian Oakley-Smith, an insolvency practitioner at PricewaterhouseCoopers, said he had not yet seen an increase in charities being forced into insolvency or an emergency merger, but had seen an "increase in anxiety" among charities.

"People are digging into their reserves to keep going and so far they are able to keep their heads above water," he said. "But what I have seen suggests things are becoming more stretched. In many cases, something will give.

"So many charities are dependent on public sector funding for so much of their income, that I expect a new round of insolvencies and mergers when many grants come to an end in the spring.

"At that point, some charities will find they have lost more of their income than they can manage."

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