Londoners sunbathe outside the Tate Modern Jas Lehal

BUILDING work on the Tate Modern extension will begin next year, even though only a third of the necessary funding has been acquired.

News of the continuing shortfall came on the same day the Tate revealed the past year has been its most successful ever in terms of acquisitions, with nearly £100 million worth of works added to its collections.

The extension of the Tate Modern in London, which will add a new 65-metre building to the former power station and increase display space by 60%, is expected to cost £215 million.

Current funding stands at £74 million - a third of the total needed - as it did in March, when planning permission for the project was granted.

In 12 months, the Tate has succeeded in raising only £4 million towards the new construction, but Lord Browne of Madingley, the chairman of the Tate trustees, was bullish about the project's prospects at the release of the Tate's annual report.

He said he expected the government to fulfill its funding promises despite reports in July that the Department for Culture, Media and Sport (DCMS) had over-committed financially and would have to cut spending on major projects.

"We are highly confident that the amount of money that has been promised by the government will be delivered," he said.

"This is something that is important to the government and important to the nation."

Fund-raising had been extremely difficult since the onset of the recession, he said, but there was a feeling that confidence was returning among potential benefactors.

"We intend to start building next year and subject to the amount of money we raise we expect to have a building there by 2012," he said.

The annual report showed the Tate acquired £96.7 million worth of works for its collections during the year, including £64 million of gifts from artists and collectors.

A total of 589 pieces were solely acquired by the Tate and 1,126 were acquired in partnership with the National Galleries of Scotland.

Major purchases during the year included Peter Paul Rubens' The Apotheosis Of James I and other studies for the Banqueting House Ceiling - the first Rubens to enter the Tate's collection.

David Hockney donated three works: his largest painting to date, Bigger Trees Near Warter from 2007, Study For Doll Boy from 1960 and The Berliner And The Bavarian, painted in 1962.

Nicholas Serota, the director of the Tate, said: "It is remarkable that, despite the current economic climate, the spirit of philanthropy remains undiminished.

"Tate has been extremely fortunate to benefit from many exceptional gifts over the past year. We must make sure that our current visitors and future generations gain from the richness of the legacy that this generosity provides."

Tate Modern will also host the first major exhibition of work by influential French artist Paul Gauguin to be shown in London for more than half a century next autumn.