A study by Capital One Bank shows that shrinking lottery funding means smaller charities that work with unpopular causes rely almost exclusively on income from government and local councils, putting them at the mercy of those funders that cherry-pick causes to suit a particular political end.
Phil Humes, business development director at drugs charity North East Council on Addictions, blamed the decline on a "fad culture", where causes dip in and out of favour with the public.
"For a time we reaped the benefits of the political spotlight when both the Government and the opposition wanted to be seen to be acting on drugs issues," he said. "This has been swiftly replaced by the feeling that they've ticked this box and no longer need to apply the same momentum. Unfortunately life just doesn't work like that."
Lack of public support, difficulty in recruiting volunteers and problems finding corporate partners willing to provide financial or practical help, are also contributing to the feeling of pessimism.
The research shows that 12 per cent of 'social fringe' charities are making staff redundant, while 8 per cent are trying to move to cheaper accommodation. Of the 100 charities surveyed, 84 did not receive any support from companies, and 56 found it difficult to recruit volunteers.
Humes also blamed the target-led demands of funders for the financial problems faced by smaller charities.
"Unfortunately, we can't tell our drug users that they have to be clean in two months because that's when we need to meet our targets," said Humes.
"The current approach means that we're expected to become increasingly professional without any acknowledgement of the increase in resources that this requires."
Susan Johnson, projects director at Prostitute Outreach Workers, said funders must start to acknowledge the value of smaller charities working with controversial causes.
"Charities like us are the only ones that provide help to people others prefer to ignore," she said. "Projects like ours have to be given the space to operate in a more holistic way if we're to make an impact and, at the moment, we're almost being forced to lie on grant forms if we want to continue operating services that really benefit those most in need."
Chris Stalker, head of campaigns at NCVO, agreed that social fringe charities must be supported.
"One of the greatest attributes of the voluntary sector is its ability to support the most marginalised people in society, often in the hardest-to-reach communities," he said. "For this reason it is extremely important that public sector funders, National Lottery distribution boards and CSR managers do not further jeopardise the most vulnerable in our society by only supporting those good causes which enjoy celebrity endorsement, political support and national recognition."