Channel 4 is in urgent need of a new funding model and has reached a “tipping point” beyond which it will move into annual losses, its chairman, Luke Johnson, said on Wednesday.

Announcing an annual pre-tax surplus of £1.6m ($3.2m), compared with £21.3m last year, Mr Johnson said results for the broadcaster, which is state-owned but funded commercially, were proof of difficulties he had been warning of for more than a year. “2007 will be the last year in which Channel 4, under its current funding model, manages the difficult balance between increased creative investment and financial breakeven.”