The government has launched a £60m fund to help make children’s television programmes in Britain, as concern grows that young people are growing up on a diet of foreign imports on Netflix and YouTube.

Karen Bradley, the culture secretary, said the money would help to fund up to half of the production and distribution costs of original children’s content made in Britain.

The money will come from unallocated funds from the 2010 licence fee settlement and will be distributed from 2019 for three years. The fund will focus on programmes from “new and diverse backgrounds” and those “made in the nations and regions”.

Although UK-made children’s television programmes such as Horrible Histories on CBBC and Bear Grylls Survival School on ITV are popular, there has been a sharp rise in young people watching foreign content such as Trollhunters, a US show on Netflix, and Masha and the Bear, which is Russian and on YouTube.

Bradley said: “High-quality children’s television is not only entertaining but plays a vital role in stimulating learning and giving young people a greater understanding of the world around them. This significant investment will give our world-renowned television production sector the boost it needs to create innovative content for a wider audience that would otherwise not be made.”

Last month Ofcom revealed it was launching a review of children’s television programming in Britain, which could lead to the media regulator demanding that ITV, Channel 4 and Channel 5 spend more on young audiences.

The review was the first example of Ofcom using powers handed to it by the government this year. An amendment to the Digital Economy Act gave Ofcom the power to set conditions regarding children’s programmes for the public service broadcasters, which include the BBC, ITV, Channel 4 and Channel 5.

Ofcom has already set targets for the BBC as part of its operating licence for the broadcaster: CBBC and CBeebies, its digital channels, must show at least 400 and 100 hours respectively of new UK-commissioned programmes each year.

Children’s television has undergone a significant transformation due to the rise of online services such as Netflix, Amazon and YouTube. The amount of television that children between the ages of four and 15 watch has fallen by almost a quarter since 2010, while YouTube is a more recognised brand for content among 12- to 15-year-olds than the BBC and ITV, according to Ofcom.

Spending on children’s television by the main UK broadcasters has broadly halved over the past decade, although the BBC announced this year that it would spend an extra £34m on children’s television over the next three years, pushing its annual budget to £124.4m. Alice Webb, the head of children’s TV at the BBC, told the Guardian that broadcasters had a responsibility to make programmes especially for children in the UK and it was an “absolutely core principle” for the broadcaster.

The Children’s Media Foundation welcomed the government fund. Anna Home, chair of the foundation, said: “We hope it will bring new and exciting content for children of all ages that could not otherwise have been commissioned.”