One in five charities are considering merging with another organisation in order to stay afloat in the tough economic climate, according to a report released today.

The proportion of charities which are thinking about mergers has nearly doubled since last year, the latest Managing in a Downturn report has found, as the majority (63 per cent) say they have already been negatively affected by government spending cuts.

The figures coming out from the report, produced by the Charity Finance Group, PwC and the Institute of Fundraising, indicate a nervous outlook for the coming year. Nearly half of the 488 organisations surveyed said they have definite plans to use their reserves to fund their activities.

With seven out of ten reporting an increase in demand on their services last year, and the same figure expecting that demand to increase yet again, the organisations involved in pulling together the report have used its findings to again push against the Chancellor’s planned cap on tax relief on donations from the wealthy.

Caron Bradshaw, chief executive of CFG, said: “If further evidence that the government are ‘foot shooting’ with policies which undermine the long term future of many charities, this is it.”

Institute of Fundraising chief executive Peter Lewis highlighted the fact that two-thirds of charities are now planning to increase their fundraising activity as and 65 per cent also are looking to fundraise in new areas. With 93 per cent of fundraisers saying last year had already been harder than the year before, and more predicting the coming year to be worse yet, Lewis said the sector did not want to have fundraising made more difficult.

“It looks like competition for donors’ cash is going to get even tougher, and the relief cap will simply tighten another major source of funds,” he said.