Small community groups had on average a 20 per cent drop in reserves last year, new research shows.

Community Matters, the UK’s largest network of small community groups, surveyed its 1,000 members this summer.

It found that although average reported earned income and asset value remained consistent with year-on-year fluctuations, a 20 per cent drop in reserves on last year was reported by members.

Further, a quarter of those surveyed had no reserves at all, the highest proportion since the survey began.

David Tyler, chief executive of Community Matters, said: “The results of this survey are very worrying. Even though our members are still generating a great deal of revenue and working hard to keep their doors open through the downturn the indications are they are having to raid their savings.

“We strongly urge local councils to recognise their important role for communities through the award of contracts, grant aid and business rate relief.

“The problem is compounded by the difficulty most small groups have in raising capital through loan finance and the lack of capital and financial security in their communities in general.”

Community Matters represents the smaller end of the community sector. A quarter of members earn less than £20,000 per annum. Four in ten members earn 90 per cent of their income or more and just under half have the equivalent of one full-time staff member or less.