Naomi House Children's Hospice invested the sum in failed British-based Icelandic bank Kaupthing Singer and Friedlander, which collapsed last month.

And despite seeking assurances from the government and Charity Commission that the cash will be protected, worried staff say they have still received no guarantee that it will be returned in full.

The hospice, at Sutton Scotney, which provides care for children with life-limiting illnesses from across the region, is already being forced to dip into its long-term reserves.

And now chairman of Wessex Children's Hospice Trust Professor Khalid Aziz fears the hospice may have to suspend its vital Hospice at Home scheme.

The pilot service has been up and running for just under a year and provides respite care for families in crisis.

Prof Aziz said: 'The situation is extremely serious.

'We're having to take decisions on a day-by-day basis.

'The fact that we can't get clarity from the government about what is going to happen is really beginning to bite. Despite our best efforts to seek reassurances about the funds we are hitting a brick wall.

'We're already having to dip into our reserves and we may now have to suspend our hospice at home service.

'The service provides highly-skilled carers who can provide emergency cover for young people with life-limiting illnesses in their own homes for up to 72 hours.

'In some cases we're offering end of life care in the home.

'Suspending the service would mean families in crisis will be without the emergency support they desperately need, but it is something we may have to consider.'

Plans to open a £12m new hospice for young people, jacksplace @naomihouse, are still on track but staff say they will be stretched.

Hospice managers have been told they may now have to wait until Christmas to find out whether their cash is safe.