Hundreds of arts organisations have lost their funding in what Arts Council England's (ACE) chairman Dame Liz Forgan described as a series of "painful decisions".

Around 1,300 theatres, galleries and arts groups applied for funding under the new regime imposed after the Government spending review cut ACE's annual grant.

Dame Liz said: "This is about a resilient future for the arts in England. We have taken the brave path of strategic choices, not salami slices, which has meant some painful decisions, and it is with great regret that we have to cease funding some good organisations."

ACE announced 695 organisations had been successful in their applications for funding from 2012 to 2015, including 110 new groups. But that is down on the 849 organisations funded under the old regime.

Of the groups that previously received funding and continue to do so, more than 300 face a cut in real terms in their grants.

One of the biggest losers was the Institute of Contemporary Arts in central London which faces a cut of 42.5%. ACE chief executive Alan Davey said the group, which will receive £900,000 a year under the new settlement, was still getting "a good amount of money".

The Department for Culture Media and Sport said a rise in lottery funding meant ACE's budget would reduce by 11.8% in real terms over four years. The Government has also asked ACE to cut the amount of money it spends on its own administration by 50%.

It will receive an increase in lottery money from £149 million in 2010/11 to �223 million in 2014/15 but it faces restrictions, which were set down when the lottery was created, on how it can be used.

Lottery funds of £18 million will be spent to support touring groups and more than £10 million will be spent on education projects.

Shadow culture secretary Ivan Lewis said the cuts would have a "chilling impact" and warned some organisations would close down and others would have to increase ticket prices. He said: "I fear a return to the 80s and 90s when the arts were for the few, not the many."