According to the survey by accountants Grant Thornton's not-for-profit group, funding sustainability remains a key concern for over half of all charities, while concerns over the changes to the tax regime have doubled. The removal of tax relief on dividends and a clamp down on Gift Aid on entry fees have hit charities.

Michael Rogerson, head of Grant Thornton's charity and not-for-profit group, said: "Consistently over the last decade, successive Governments have hived off huge amounts of public sector activities, such as drug rehabilitation, counselling and medical research, and left the charity sector to fill the need. Recent legislation and the current economic climate have made it a very difficult environment for charities to operate in. Government policies in particular have not been helpful to charities. We sense a growing dissatisfaction among the sector."

Trading by charities has offset the falls, however. According to the research, the proportion of funds raised through charity shops is up since 2002. Reliance on donations had also risen amongst those surveyed, with 24% of charities naming donations as their main type of funding, up from 21% in 2002.

More than 170 UK charities took part in the survey in early 2004.