After 70 years monitoring the airwaves, BBC listening post could be cut off

Budget review threatens Caversham Park, which broke news of JFK's assassination

BBC Monitoring, a little-known section of the corporation which listens in on 3,000 media sources from around the world, is facing swingeing budget cuts as a result of a drop in its government funding which could lead to its closure.

For nearly 70 years, workers at the former stately home in Caversham, near Reading, have monitored publicly available material in more than 100 languages to provide a running digest of global journalism for senior civil servants, ministers and commercial clients.

It uses a "United Nations" of 400 staff based in a Victorian mansion in Berkshire, and the organisation's work has given it a front-row seat at a series of global events, including providing the translation of an obscure radio broadcast by Nikita Khrushchev which ended the Cuban missile crisis when it was rushed to the White House. It also broke the news to British audiences of the death of President John F Kennedy.

But BBC Monitoring now faces an uncertain future after it emerged that the £25m annual government grant from the Cabinet Office, which provides the vast majority of the unit's funding, is set to be slashed in this autumn's spending review, potentially tipping it into insolvency unless it makes extensive cuts in its services.

At a briefing to all staff last week, Chris Westcott, the director of BBC Monitoring, told employees that the "situation is grim" and confirmed that failure to accommodate the government's cuts could lead to closure. Managers are likely to be asked to find savings of £3.2m during the next two years, making the trimming of key services inevitable, according to managers.

The monitoring operation, which does not receive any licence-fee funding, has been the subject of a financial squeeze for the best part of a decade, making efficiency savings of 7 per cent a year since 2001. Last year, it made a profit of £2.5m on its total income of £28.8m, supplemented by deals with commercial customers and foreign governments.

A BBC insider said: "We have got two options: either we cut some of the core operational services and devalue the business, or we try to stick together and look for a way through this. But we are already cut to the bone and if we have to cut more, we are in deep trouble. There is a risk of closure if the cuts go too far. The situation is quite dire."

The current five-year funding settlement for BBC Monitoring is due to come to an end this year and with its main customers – the Cabinet Office, the Foreign Office and the Ministry of Defence – facing 25 per cent cuts in their budgets, the prospects of maintaining funding at its current level are understood to be negligible.

The role of the unit is also being considered as part of the Strategic Defence Review. Part of the work undertaken by Caversham, whose regional units include a central-Asian listening station in Uzbekistan, is transcribing broadcasts by Afghan radio stations sympathetic to the Taliban, offering an insight into the thinking of the militant Islamists.

It was a similar need to gain insight into the mindset of implacable enemies and uncertain allies which led to the founding of the BBC's monitoring operations during the Second World War. A colourful team of sound engineers and linguists, including the Austrian-born art historian Ernst Gombrich, was assembled in camouflaged huts in the ground of a stately home in Worcestershire to listen to German, French, Italian and Russian radio broadcasts.

Gombrich later recalled that the rudimentary wax cylinder recording technology made it difficult to discern whether the reedy, faint voice of a foreign broadcaster was saying "send reinforcements, am going to advance" or "send three and four pence, am going to a dance".

The operation moved to Caversham Park, the one-time home of Elizabeth I's treasurer, in 1942 with a remit dedicating its staff to "reporting foreign news media comprehensively and accurately, without bias or comment".

It is a global burden shared with the Foreign Broadcast Information Service, which was once part of the CIA, but is now transferred to the US government's Open Source Center. It keeps a number of staff in the slightly idiosyncratic surroundings of Caversham Park, where gardens partly landscaped by Capability Brown host a dozen satellite dishes. The staff canteen is housed in the old orangery.

Over the years, BBC Monitoring's staff – currently standing at about 450 worldwide and recruited from diverse backgrounds, ranging from university graduates to former asylum seekers – has maintained a constant vigil, listening at any one time to 37 television stations and 100 radio services. Since the 1990s, it has also sifted through newspapers and websites, with the internet now accounting for about a third of its activities.

Such is BBC Monitoring's reputation for absolute accuracy, President Kennedy accepted at face value a translation of a radio address by Khrushchev in 1962 to a domestic audience announcing the withdrawal of Soviet vessels carrying nuclear missiles to Cuba. Without waiting for confirmation from US intelligence sources, Kennedy responded to the Kremlin's overtures immediately.

The Cabinet Office, which oversees government funding of BBC Monitoring, said: "We are involved in regular discussions with the BBC over expenditure in this area and nothing has been put to ministers to decide. No decision has been taken [on future funding]."

In a statement, the BBC said it would be approaching the funding discussions with "vigour and confidence" but added it was "acutely aware that the prevailing economic climate will bring huge challenges and tough choices".