SCOTTISH charities have gone into “survival mode” amid severe financial pressures, according to a new report.

Analysis by the Scottish Council for Voluntary Organisations (SCVO) found there has been a sharp drop in confidence in the third sector.

It called on the Scottish Government and councils to help the sector by awarding fairer funding packages.

The Scottish Government wants a three-year funding cycle to give charities greater stability.

However, councils have said that until their income is guaranteed three years in advance, they cannot plan ahead.

The SCVO report found that 47 per cent of charities saw a reduced turnover last year.

Most of those that did record growth were large organisations with an annual turnover of more than £500,000.

It highlighted concerns many organisations are unable to plan ahead because funding is allocated on a short-term basis. Yet 72 per cent expect demand for their services to increase this year.

John Downie, director of public affairs at SCVO, said: “Our research clearly shows that Scotland’s third sector has given up on the idea of growth and has gone into survival mode.

“Organisations feel they will have to do more with less as demand for services increases at a time where funding streams are squeezed.

“There is a strong expectation of growing competition to secure unstable hand-to-mouth funding and this is hampering the sector’s ability to develop.”

A spokesman for the Scottish Government said it was supporting Scotland’s “strong and dynamic third sector”.

He said: “We have protected core funding for the sector of £24.5m next year, an investment in prosperity and social cohesion across the country.

‎”We will work with the sector to ensure our support continues to be effective.”