The Cheltenham Literature Festival has been forced to cut ties with Baillie Gifford after threats of a boycott by activists campaigning against fossil fuels and Israel.

It follows similar decisions taken by the Hay Festival and the Edinburgh International Book Festival.

All had been targeted by Fossil Free Books, a campaign group that has called on authors to withdraw and threatened to hold protests on site.

The group has highlighted Baillie Gifford’s investments in companies linked to the fossil fuel industry and to Israel’s defence, technology and cybersecurity industries.

Organisers at Cheltenham said that it was “with sadness that we announce the withdrawal of a major sponsor, Baillie Gifford”.

They said: “We would not have chosen to find ourselves in this position. We believe that change is only possible if we as a culture make it together. Engagement with festivals like ours – by readers, writers, policymakers and indeed by sponsors – is a crucial means of making progress.

“Literature festivals rely on a mix of funding which includes a significant sum generated through corporate sponsorship. These funds ensure that wide access to a diverse culture remains something we can offer to all.

“Without it, there would be no free events, ticket prices would increase, schools programmes would reduce in scope; some festivals would close.”

The director of the Edinburgh International Book Festival told The Times that writers had begun pulling out even though they did not agree with the protest.

“We were already beginning to see people who don’t particularly align themselves with the campaign but fear that this is not good publicity for their books to be involved with this,” Jenny Niven told the Times, adding that an “enormous peer pressure was beginning to build up”.

Charlotte Church, Nish Kumar and Dawn Butler, the Labour candidate for Brent East, were among the speakers who pulled out of the Hay Festival.

In emails seen by The Telegraph, Fossil Free Books wrote to authors appearing there to “recommend” that they withdraw from the festival or make a statement on stage.

The “creative action” suggested included calling for Baillie Gifford “to divest from companies complicit in Israeli apartheid, occupation and genocide in line with international law, as well as from fossil fuel companies” or to read a poem by a Palestinian author followed by a minute’s silence.

A later email claimed that “pro-Palestine protest groups” would be at the entrance to the festival and “might have associates or friends attending Hay”. No protests took place.

Nick Thomas, a partner at Baillie Gifford, condemned the “anonymous campaign of coercion and misinformation”.

He said: “We step back with the hope that the festival will thrive this year and into the future.

“We hold the activists squarely responsible for the inhibiting effect their action will have on funding for the arts in this country.”

Authors who have criticised the protests include Howard Jacobson, who accused the campaigners of trying to spoil literary festivals and “to spoil literature itself”.

Simon Schama condemned the “silencing” of debate and said that literary festivals were “imperilled”.

John Vaillant, the most recent winner of the Baillie Gifford Prize for Non-Fiction, for Fire Weather: A True Story from a Hotter World, a book about climate change, said there was “more value in staying in the room” with such companies.

Baillie Gifford has said that only 2 per cent of clients’ funds are invested in companies with fossil fuel links, and denied that it is a large investor in the Occupied Palestinian Territories, calling the latter suggestion “offensively misleading”.

The company said that it invested approximately $19 billion (£14.9 billion) in multinational technology companies such as Amazon, Nvidia and Meta, which have commercial dealings with Israel “that are tiny in the context of all of their overall business”.