A pioneering British project that is on the threshold of developing a revolutionary treatment for cystic fibrosis is facing the axe. The setback is a desperate blow for thousands of young people who suffer from the incurable wasting illness.

The £30m programme, involving a consortium of scientists from London, Oxford and Edinburgh, had reached the final stages of drug development but earlier this year ran out of cash. More than 80 scientists had been working for a decade on the treatment, funded by the Cystic Fibrosis Trust.

However, the trust has suffered a recent slump in raising funds because of the recession. As a result, the consortium's work has been suspended and unless a further £6m is raised by autumn, it will be abandoned.

"We have developed a drug," said Professor Eric Alton, the consortium's co-ordinator. "We have carried out safety tests on it. We have found that the drug works very well in many patients. We have manufactured large numbers of doses of the drug. We have lined up 200 patients to take part in the final phases of trials. But now we have had to suspend operations because our money has run out. We are already laying off staff. It is horrendous."

This point was echoed by Katrina Dujardin, whose 12-year-old daughter Anna has cystic fibrosis. "It would have been disappointing if the project had failed. But that is not the problem. It has succeeded. We can see the science is there and that it works. However, we cannot now afford to go forward because of lack of finance and that is heart-breaking," she said.

Cystic fibrosis is caused by a mutant gene that prevents cells from producing healthy digestive juices, sweat and mucus. Individuals who carry a single copy of this gene are unaffected but those who inherit two copies – one from their father, one from their mother – suffer because their bodily fluids become thick, sticky and clog up lungs and digestive tracts which then become infected. Around 150 babies a year are born with the disease in Britain, including James Fraser Brown, the four-year-old son of Gordon Brown.

Before the development of antibiotics, patients would die in childhood. Even today, few live beyond their 30s and survive only by going through long daily physiotherapy sessions, the consumption of dozens of vitamin and digestive enzyme tablets, and the constant use of antibiotics and asthma inhalers.

When the genetic cause of cystic fibrosis was revealed in 1989, scientists realised it should be possible to put a healthy gene into patients' cells so their bodies could start making healthy fluids. However, this work has proved to be intensely difficult and in 2001, the UK's three main cystic fibrosis research groups – in London, Oxford and Edinburgh – decided to co-operate on a single, ambitious project. For its part, the Cystic Fibrosis Trust announced it was abandoning its commitments to fund support and care for patients in order to put its entire funding, raised through charity shops and collections, into the consortium.

A total of £30m was raised and, after a decade of painstaking work, the researchers developed a form of gene therapy for cystic fibrosis that passed early clinical trials last year. "Those trials established the drug's safety," added Alton, who is based at Imperial College, London. "In addition, they showed that in many patients the ability to make healthy proteins was restored for several months and that was just with one dose. It was incredibly encouraging."

The consortium began work on a full trial involving 200 patients at the beginning of this year. Some patients would get placebos and others the full drug. "That would have finally proved the potential of the drug, I think. But before we could start we were told the money had run out," added Alton.

"We need another £6m to complete the project. If we got that money today, we could start the trial early next year. But we are already having to lay off staff and if we don't get the money by autumn, we have to close down the entire operation. Everything we have achieved will have been lost."

Matthew Reed, chief executive of the Cystic Fibrosis Trust, agreed that an additional £6m was now needed to save the project. "We are pulling out all the stops to make it happen. We are trying to secure funding from the Medical Research Council and we are trying to attract new philanthropic gifts into the programme as well as reaching out to our existing supporters and community," he said.