Charities with incomes of less than £1m reported total combined deficits of  £306m in 2011, compared with an overall surplus of £325m in the 2007 financial year, according to new research from the Charities Aid Foundation (CAF).

CAF’s research analysed accounts lodged with the Charity Commission in their financial year ending in 2011. It revealed the situation reported in 2011 has markedly deteriorated from 2010, when SMCs reported an overall loss of only £20m.

John Low, chief executive of the Charities Aid Foundation, said: “The deepening losses being sustained by our nation’s small and medium-sized charities are a great cause for concern.

“Many SMCs doing vital work in our communities are facing falling incomes at the very time that people are increasingly looking for their support.

“The vast majority of our charities are relatively small and do amazing work. But many are having to dip into their reserves to keep going, cut back on the work they do and lay off staff if they employ any.

“The situation is so worrying that we need the government, business and the public to get behind Britain’s charities – so that they can survive and carry on their important work in these tough times.”

SMCs make up the majority of the nation’s charities – representing more than 130,000 of Britain’s 162,831 registered charities.