As many as 60 British TV production companies could face going out of business if Channel 4 is privatised, according to a report published as the government closes its public consultation into the potential sale of the broadcaster.

Channel 4’s unique status in British broadcasting, established in 1982 as an editorially independent broadcaster to provide a culturally challenging alternative to BBC One, BBC Two and ITV, makes it vitally important to hundreds of independent TV producers across the country.

It is publicly owned but commercially funded, mostly through TV ad revenue, and is not required to turn a profit or focus on dividends for shareholders.

However, in June the culture secretary, Oliver Dowden, announced plans to privatise the broadcaster. A 10-week public consultation on the proposals closes at 11.45pm on Tuesday.

For the government to generate a significant return on the sale it would have to significantly relax Channel 4’s remit, such as allowing it to make its own shows, according to a report by Ampere Analysis that warns the broadcaster’s GBP660m annual budget for commissioning TV productions is likely to be a key cost-saving target for any new owner.

“If the government looks to relax Channel 4’s remit to derive more money from privatisation, then that would have a substantial negative impact on the UK production sector,” said Richard Broughton, an analyst at Ampere. “Channel 4 works with more small production companies than any other broadcaster, we estimate 200 over the last two years, and a privatised Channel 4 would likely leave many financially challenged.”

An analysis of those 200 production companies found that almost 140 relied on Channel 4 for half, or more, of their TV production work. It also found that small regional TV production companies were more likely to be reliant on the broadcaster for commissions.

“Regional production companies are more likely to be reliant on Channel 4 projects,” said Broughton. “A sale of Channel 4 alongside a relaxation of its remit would therefore undermine the UK government’s ‘levelling up’ agenda.”

Pre-Covid, Channel 4’s total programming budget stood at GBP660m, with almost GBP500m of that on original shows such as It’s A Sin and Gogglebox.

However, the report argues a new owner would look to cut 40% to 50% of Channel 4’s programming budget to boost its roughly 8% margin closer to the level of commercial peers across Europe, which operate at about 15% or higher.

“A reduction in spend on original productions could jeopardise 50 to 60 small production companies,” said Broughton. “And potentially more if a buyer is particularly risk averse and looks to commission more from larger producers.”

Broughton said that Channel 4’s cost-cutting actions during the pandemic provide evidence to any potential buyer that slashing the content budget can provide immediate financial returns.

Last year, Channel 4 made GBP150m in cuts, almost all of it from the programming budget, as the pandemic stopped productions and TV advertising revenue declined steeply. The broadcaster went on to report a pretax “surplus” of GBP74m, the largest in its 38-year history, as the TV ad market bounced back.

Last month, former Channel 4 chairman Lord Burns and ex-chief executive David Abraham said key public service content at the broadcaster, such as the Paralympics and news and current affairs, would probably be slashed by a new owner as they do not make a profit.

Ampere estimates that without any change to Channel 4’s current obligations the government can only expect to raise GBP400m to GBP500m from privatisation. The last government attempt to sell Channel 4 in 2016 saw a GBP1bn price tag attached to the business.

Potential suitors this time around reportedly include US pay-TV giant Discovery, which was considered a favourite last time before the government scrapped its privatisation plans, and ITV.