Parents have launched a campaign to try to save a community playgroup which is at risk of closure after 30 years of operating in Fulham.

Funding for the under-fives club at Sands End Playhouse was withdrawn by Hammersmith and Fulham Council earlier this year, and the group will have to move out of its Stephendale Road home in April when the authority begins charging commercial rent on the building.

Project managers SEAPIA – Sands End Associated Projects in Action – has told three permanent members of staff they will be made redundant because it can no longer afford to pay them.

The likely loss of the Playhouse has prompted a campaign by parents to try to raise enough money to take it over as a social enterprise. They hope to raise £10,000 before Christmas, around one ninth of the annual running cost.

Up to 100 children, parents and grandparents visit the centre every day for drop-in sessions each weekday morning. They are asked to give a £2 donation for each visit, and many argue that the Playhouse offers a uniquely affordable service which could not be replaced.

Amanda Alloway, who regularly brings her three-year-old son Tyler Forde, said: "It's great for socialising and it's been a great start for Tyler. I can't believe they're going to get rid of it. We have to have cutbacks, but not with an essential place like this."

Barbara Nicholson, a mother of two who helped set up the Friends of Sands End Playhouse in response to the cuts, said: "The Playhouse is at the heart of the Sands End community and its value to parents, grandparents and new mothers is huge. For many parents it is a lifeline, providing them with the support to help them cope with the daily challenges of parenthood."

SEAPIA was one of several organisations to have funding reduced by the council in response to cuts from central government. It lost out on £48,000 for under-fives provision and was told it would have to begin paying commercial rent of around £18,000 per year to stay in the building, although it was given £94,000 to continue running other projects, such as a nearby adventure playground for older children, and will get another £50,000 next year.

The council's children's services leader Helen Binmore said: "We are working closely with both SEAPIA and the parents' group to ensure services for families and children continue to run in the area. We are discussing various options with the parents' group, which is keen to run the under-fives provision, and have even given them the option of running a service from the Playhouse, which they could rent from us."

She added: "Our funding decisions were difficult but in the current economic climate community groups cannot rely on the council as their sole source of funding."

Lin Waghorn, the manager of the Playhouse, now hopes enough cash can be raised to keep part of the service running.

She said: "All the parents say this is the best playgroup they've been to, not just in the borough but in the whole of London. There are other drop-in centres, but nothing quite like this."

SEAPIA chair Susan Anderson promised to work to restore the Playhouse in the future if immediate funding cannot be found.

"We're not down and out – we will continue to look for funding, and if we can find the money we will bring it back," she said.

To donate to the campaign visit www.justgiving.com/friends-of-playhouse