A “lost generation” of young people could occur if key mental health services are not protected from funding cuts, charities have warned.

Rethink Mental Illness said early intervention in psychosis (EIP) services - which help people recover from psychosis - are struggling to survive across England.

Further cuts will result in “tens of thousands” of young people suffering psychosis missing out on key care - affecting recovery and leading to extra costs for the NHS due to hospital stays, it said.

New data from Rethink shows that 50 per cent of EIP services in England have faced cuts in the past year, some by as much as 20 per cent.

More than half of EIP services surveyed said the quality of care they can offer has fallen in the last year, while 58 per cent have lost staff.

The charity warned that, in some places, EIP services are being disbanded completely despite the fact many are already over-stretched and unable to meet local demand.

It also warned about the impact of NHS England and Monitor setting a higher efficiency requirement - therefore suggesting less income - for mental health services in 2014-15. The issue has been highlighted by HSJ in recent months, including criticism from health minister Norman Lamb.

Jane Hughes, director of communications and campaigns at Rethink, said: “It’s a scandal that these crucial services are going through major funding cuts.

“Early intervention is absolutely critical in helping young people recover from psychosis, which affects around 220,000 people in England. This care saves lives - it reduces the risk of a young person with psychosis taking their own life, from as much as 15 per cent to just 1per cent.

“It also offers the NHS huge savings, by helping young people avoid reaching crisis-point and being hospitalised. If early intervention care was available to everyone who needs it, the NHS would save £44 million each year care through reduced use of hospital beds.

“That’s why cutting early intervention care makes no sense whatsoever. The human, social and economic costs of are too great, especially at a time when mental health hospitals are completely over-stretched and unable to cope with demand.

“We are at risk of losing a generation of young people who, with the right support, could have good quality of life and play a meaningful role in society. We wouldn’t accept this situation for young people with cancer, so why should it be different for young people with psychosis?”

Sarah Brennan, chief executive of YoungMinds said: “The report supports research undertaken by YoungMinds which found that two-thirds of local authorities in England have reduced their child and adolescent mental health services budget since 2010.

“These services play a vital role for vulnerable children, young people and their families and intervening early minimises escalation of problems and associated costs. It not only makes economic sense to invest in early intervention services, but there is also a clear moral imperative to do so.”

A Department of Health spokeswoman said the government has invested over £50 million into improving access to treatment for young people with mental health problems.

She added: “It is completely unacceptable to disadvantage mental health when allocating local funds. We are clear that the NHS must place equal priority on physical and mental health - decisions on how to spend NHS money should reflect this.

“We are working closely with Rethink and are jointly convening a Psychosis Summit next month to understand how better care can be provided to people with psychosis.”