Charities expect a drop in statutory funding of more than £1bn over the next year, according to the latest figures from the Charity Finance Directors' Group, the Institute of Fundraising and the professional services firm PwC.
Research for Managing in a Downturn, the fourth report in the series, which was conducted before the Comprehensive Spending Review among 256 members of the CFDG and the IoF, found that charities with statutory funding were expecting average cuts of 8 per cent.
The report, published today, estimates this would equate to approximately a £1.2bn cut in statutory funding for charities, based on a £15bn total.
The report also says 93 per cent of charities had already experienced a reduction in real income levels from statutory sources in the 12 months to August.
Almost 40 per cent of respondents said they had seen an increase in demand for their services as a result of the recession, with forty-four per cent of respondents saying they intended to call on their reserves in the next 12 to 24 months.
The report says it is important to note that 68 per cent of charities have reserves that represent less than six months' average expenditure.
"We would urge all charities with modest levels of reserves to consider carefully which services to maintain, so as not to risk the solvency of the organisation itself," it says.
The survey found that 83 per cent of respondents intended to increase fundraising activity, with 60 per cent of those receiving statutory income planning to explore new areas of fundraising.
Caron Bradshaw, chief executive of the CFDG, said the survey showed charities would need to think more creatively about other sources of income.
"Charities should not shy away from challenging the private sector to step up and should be bold in their approaches to funding in 2011," she said.
Amanda McLean, chief executive of the IoF, said: "Charities still need to be canny in their investments, including considering how to maximise on staff and fundraising resources. They also need to remain open-minded about the role of trustees, and the possibility of joint ventures and mergers."