In the last 10 years the museum has seen a 30% fall in the buying power of government funding

British Museum MD

The proposed study centre, a 12-storey building planned for Holborn, was due to be the museum's next major development.

"In the last 10 years the museum has seen a 30% fall in the buying power of government funding....that's �10m a year in hard cash terms," said the museum's outgoing managing director, Suzanna Taverne.

"This was despite the fact that the museum is both a major magnet for the country's tourist industry and a serious provider of education."

She said the museum had been badly affected by the foot-and-mouth crisis, while it was likely the terror attacks in America would also mean fewer overseas visitors.

However UK visitor numbers have increased, thanks to the launch of the new �100m Great Court, which opened last year.

A spokesman for the Department for Culture, Media and Sport (DCMS) said although the real value of the grant had fallen, its grant to the museum would still be �36m, a third of the overall funding.

The museum has around 5.5 million people visiting annually

Ms Taverne criticised the government's handout to establishments which had only recently decided to adopt a free admission policy.

'Double whammy'

"We at the British Museum valiantly held out against previous government pressure for the introduction of admission charges. The result is that we were penalised twice," she said.

"Firstly we lost the revenue we would have earned by charging. Now to add insult to injury, we are missing out on a pay-off which could be worth some �8m to us which the Department of Culture, Media and Sport is giving to museums and galleries that used to charge.

"That's a real double whammy."

It is for the museum to manage the funds available to it

DCMS

The DCMS spokesman said the museum would have benefited by �700,000 due to VAT changes for free establishments.

He added: "The department will work closely with the museum to help it through its current difficulties. However it is for the museum to manage the funds available to it."

As well as the government funds, the museum is also funded by revenue-raising activities such as onsite retail, catering, corporate hire, sponsorship income, Great Court trading, Friends' organisations and also through patrons and donors schemes.

The support from Barclays is to help finance an exhibition on the Queen of Sheba, beginning in June 2002.