Its survey of small charities in the children's sector found that the squeeze on lending and the economic downturn had forced more than a quarter to either cut jobs or plan to issue redundancy notices over the coming year.
A total of 125 organisations with an annual income of less than £250,000 took part in the survey in November. Forty per cent said that they were in a vulnerable funding position and could close if funding did not come through.
When the same question was asked in 2007, only one in 10 respondents said they were in this situation.
Those charities with more than £50,000 income are among the worst hit. Just over half of these said closure was a real fear, compared to one in three of the smallest organisations (see graph). They were also the most likely to cut jobs, with 43 per cent of larger organisations either already making redundancies or anticipating having to over the coming year.
Jordon Thompson, small organisations development manager at Children England, said a lack of long-term funding is an increasingly common concern.
"These organisations are so reliant on funding streams that are now under threat. If funding is taken away it presents charities with a real problem in terms of meeting their costs, particularly staff costs," she said.
Jean Carpenter, director of Brixton-based youth charity Flipside, believes financial problems are already affecting services.
She says the charity, which is involved in crime prevention and peer mentoring work, has already made one member of staff redundant and not replaced another vacant role.
"Funding is not secure anymore and it makes it really difficult to plan in the long term. This is a real problem as a lot of the work we do involves building up trust over a period of time. We explained to one young person that we may not be able to continue a particular project beyond the next few months. He said, 'typical, people come in and then they go, no one ever stays'."
She added that the charity was also bracing itself for the axing of a drug and alcohol specialist post, after being told that further funding would not be available.
"It was council funded, but it is not their fault, they say they are no longer getting the funding from central government. The post is going to be part of something else and merged with another group," she added.
The survey also found a widespread lack of involvement of small children's charities in commissioning and local service delivery.
Less than a quarter of respondents had a council contract to develop services and two-thirds had no involvement with their local children's trust.
Awareness of the new vetting and barring scheme was low - a third of respondents had not heard of it.
