Charities hit by credit crunch

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Around 30% of charities said they had already seen a drop in individual donations, while 88% expect their income to fall further going forward, according to the Charities Aid Foundation and the Association of Chief Executives of the Voluntary Sector.

The problem is being made worse by rising inflation, with 71% of chief executives of charities saying their costs have increased.

As a result 29% have made redundancies and 56% have limited staff pay increases.

Just over three-quarters of charities said they had ramped up their fundraising activities in a bid to boost their income, while 63% have increased their grant applications.

The problems come at a time when most charities are facing increased demand for their services, with 72% of those questioned reporting a rise.

The Charities Aid Foundation said the fall in donations bucked the trend seen during previous recessions, when individual donations remained relatively stable.

John Low, chief executive of the Charities Aid Foundation, said: "This research reveals the economic quandary that many charities are facing - increasing costs and demand for their services against a backdrop of static or declining public donations."

But he added that charities' income could be boosted by around £700 million a year if everyone who made a donation did so using Gift Aid, under which charities are able to reclaim basic rate income tax on donations.

:: An online survey was completed by 43 chief executives during August and September.