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A third of charities have seen donations fall in the last year while three quarters have seen an increase in demand for services.
 
A poll of charity bosses by the Charities Aid Foundation (CAF) reveals how the economic slump over the last year since the collapse of Northern rock has hit donations.
 
Some 30 per cent of charities have seen individual donations fall and a further 30 percent have seen no significant change over the same period.
 
Some 88 per cent of charity chief executives expect income to fall over the next 12 months.
 
Furthermore 71 per cent have seen costs increase.
 
As a result, 29 per cent of charities have been forced into staff redundancies, and 56 per cent have put caps on pay increases.
 
At the same time 72 per cent of charities have recorded an increase in demand for services.
 
Dr John Low, CAF chief executive, 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.
 
"Although one answer would be for everyone to give more, we estimate that around £700 million is wasted in unclaimed tax.  If every person who pays tax made their donations using Gift Aid, this would provide a lifeline for many charities in the current economic climate."