Vital services to help the most vulnerable children are being closed as charities face big cuts in donations as a result of the economic crisis.

The NSPCC has had to close two key services, in Derbyshire and Norfolk, because of lack of funds, The Times has learnt.

Smaller voluntary bodies such as Woking and Sam Beare Hospices face having to shut completely rather than provide a threadbare service with their dwindling funds. The charitable sector also has £150 million tied up in the collapsed Icelandic banks, with little hope of getting much of it back. Naomi House Hospice, hit by that bank fiasco, has also had to close some of its services.

Most charities contacted by The Times yesterday said that they were trying their utmost to save programmes and services by making redundancies and cutting adminstrative costs. Shelter, Oxfam and the disability organisation Scope have already announced redundancy programmes and are building up trading enterprises to help to recoup costs.

But things are getting worse every week. In October a Charities Commission survey suggested that one in 12 charities was having to make redundancies to avoid service cuts. But the latest figures show that one in three is laying off staff and half are unable to meet increasing demands.

Despite the recent highly publicised child abuse cases such as the death of Baby P, even the NSPCC plans to make 150 of its 2,500 staff redundant and is starting to close services because of substantial reductions in corporate and legacy donations.

The family support team in Norfolk helps dozens of dysfunctional families where intervention by social workers could save children from abuse. “We try to identify parents who might have anger difficulties which could spill over to abusive situations,” an NSPCC spokesman said.

The second service to close is a therapeutic service in Derbyshire, where a child protection team last year helped 67 children who had been sexually abused. “The staff help children aged 5 to 18 to recognise serious changes in their behaviour as a result of their experience and support them in retrieving their own personalities,” the spokesman said.

The NSPCC admits that it has lost £2 million from reduced legacy payments, which has led to the service cuts. Many charities rely on being given a percentage of an estate, or occasionally an entire estate, when someone dies. But after the collapse of the housing market the value of these estates is dropping by 20 to 30 per cent, resulting in big reductions to charities. The difficulty in selling homes, which can take six months or more, has been causing big cashflow problems.

“Previous downturns in the economy have not adversely affected the NSPCC's income because the public are aware we need their support more than ever in such circumstances,” said Giles Pegram, the NSPCC's director of fundraising. “However, this time we are already noticing an impact in some areas of fundraising. It is becoming more difficult to recruit new donors and to upgrade existing supporters.

“We are also noting that some individuals and organisations can no longer afford to give so much. We know that legacy income is down because of its dependence on house prices and there has been a downturn in ticket sales for some events.”

Other charities such as Shelter, the charity for the homeless, say that corporate donations are “falling off the edge of the cliff”. Adam Sampson, Shelter's chief executive, told The Times that five big corporate donors, including Bradford and Bingley, had cut donations by £400,000 this summer, a fifth of their corporate funds. Legacy donations, usually £3million a year, had also halved.

Shelter is making 43 redundancies, including senior management staff, but Mr Sampson said that services had so far been protected. He disclosed that the charity had lost up to £2.5 million out of a predicted income of £45million from corporate donations, legacies, individual donations and government or local authority grants.

“We have about 100,000 standing orders from individuals of £5 a month or more which are standing up well,” Mr Sampson said. “But we are losing from corporate donations and legacies as the house market collapses. We will have to be more innovative and rethink how we raise money.”

Mr Sampson said that Shelter would now start exploring “ethical business” with commercial partners. He mentioned Age Concern, which sells travel insurance for elderly people.

Oxfam, which is losing up to 45 staff, says that its priority is to protect its overseas services, so it is cutting back costs in Britain by 10-15 per cent. Its biggest losses are due to the falling value of sterling, with each pound buying fewer goods abroad. But Oxfam's trading income in Britain is holding up well, with more people buying clothes from charity shops as the recession bites.

The charity said that it was also raising income through a new partnership with Marks & Spencer. Anyone bringing M&S clothes to an Oxfam shop will be given a £5 voucher to spend on goods over £35 at the company's stores.

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