A charity that runs a hospice for terminally ill children has emerged as the latest victim of the Icelandic banking crisis.

Naomi House in Hampshire helps 250 sick children and their families each year. After a highly successful fundraising appeal to build a second hospice for teenagers, it placed £5.7 million on deposit with Kaupthing Singer and Friedlander. Building started on the new centre two months ago, but now the hospice cannot get access to the funds to pay contractors.

Last night Khalid Aziz, chairman of Wessex Children’s Hospice Trust, called on the Chancellor to clarify whether its deposit, like those of retail investors, would be guaranteed by the Government.

He told The Times: “We decided, prudently, to take the money we raised in the appeal out of shares and put it on deposit at Kaupthing Singer and Friedlander. We have been a customer of the bank for many years and until last week it was double-A rated.

“We cannot wait for the Government to sue the Icelandic Government for us to get the money back. We need it now, because construction of the new hospice is under way. We urgently need clarification over whether the Government is going to cover our deposit.” Professor Aziz reassured families that services at Naomi House would continue. “Fortunately we have a very prudent reserves policy.”

Stephen Bubb, chief executive of Acevo, the Association of Chief Executives of Voluntary Organisations, said: “The collapse of Icelandic banks has hit charities hard. In one afternoon Acevo has had reports of various charities losing up to one fifth of their reserves, in sums ranging up to £12 million. The total losses reported to Acevo add up to over £25 million.”

Pressure mounted on the Government to protect charities’ bank deposits after the leading provider of financial services to the voluntary sector said that more than £30 million had been invested in the stricken Icelandic banks. The Charities Aid Foundation said it knew of at least half a dozen charities with significant funds at risk. John Low, chief executive of the foundation, said: “The Government has ignored the letter we sent in August calling for full protection for all charity deposits. The impact of this on the people and causes dependent upon them could be catastrophic.”

The Samaritans also confirmed that it had links with Kaupthing Singer & Friedlander, which is in administration.

The Treasury said last night charities will be treated in the same way as other institutional investors, which means they will not be covered by the guarantee extended to retail investors.

Times Recommends

• US jobs plunge in worst fall since 1974
• Brown will press banks to pass on full rate cut
• Woolworths axes 450 staff amid firesale