Can Britain's theatres avoid the final curtain?

The onset of spring is a time of hope and optimism - but not in the public sector. As funding cuts deepen, the prospect of a new financial year brings with it trauma, pessimism and new fears for jobs and services. This is particularly true in the arts, with theatres trying to cope on reduced income and some facing closure because of local government reorganisation.

Theatr Clwyd has issued a dire warning that unless further funding is approved by the second week of March it will close this July, ending 20 years of artistic success. Theatr Clwyd receives pounds 1.5m a year from Clwyd County Council and pounds 500,000 from the Arts Council of Wales. But with Clwyd council due to be abolished in April, Theatr Clwyd is finding it impossible to replace the shortfall. Even with a grant of pounds 600,000 from the new Flintshire unitary council, and a one-off pounds 1.3m payment towards debts from the Welsh Office, the theatre is on the brink of closure.

Unitary councils will be established in all of Wales and Scotland this year. Avon, Cleveland and Humberside county councils are to be replaced by unitary councils this April, and more English unitaries will be created in a year's time. The new unitaries will be under heavy financial pressures, and few will be able to continue funding for the arts at levels provided by county councils. Many unitaries are geographically smaller than the county councils they replace and there will be resistance to providing grants to theatres in neighbouring authorities.

"The rich suburbs give us 10 per cent of audiences, but their council may say the theatre is nothing to do with us, why should we pay you?" says John Strickland, spokesman for Glasgow'sCitizens Theatre, which faces major cutbacks. Several Scottish theatres are at risk through the loss of regional councils, such as Strathclyde, that have prioritised the arts.

The creation of doughnut authorities in England - a unitary city in the middle, and two-tier shire county around it - is likely to cause the same problems. Nottingham Playhouse could lose its pounds 268,000 grant from Nottinghamshire County Council when the city achieves unitary status.

Theatres have been badly squeezed, with many councils providing standstill grants for the past three years. The Arts Council is unable to make up any shortfall: its grant from government has been cut for next year by pounds 5m.

Coventry's Belgrade Theatre, which is involved in a series of crisis meetings with the union Equity and the city council to try to save the theatre, calculates it has lost the equivalent of pounds 155,000 in three years because of standstill grants.

Derby Playhouse says it has lost pounds 100,000 in real terms over four years by the failure of funders to link grants to inflation. This has been recovered by boosting box-office income by 26 per cent. The theatre says this has forced it to adopt a more conservative artistic policy.

The Liverpool Everyman went into liquidation in 1993 after the city council halved its grant. It was later rescued by supporters and sold nearly 84,000 tickets last year, compared with 22,000 two years before. This success has helped to earn it an additional pounds 40,000 grant from North West Arts, but even so it is likely to have to raise ticket prices.

Some theatres have entered into agreements with universities and further education colleges for use as training and rehearsal space. Others have entered into co-productions. This is no panacea, with Leicester's Haymarket Theatre suffering large losses from its Christmas show, a co-production with an Irish theatre. The Haymarket, which was involved in eight co-productions in 15 months, warns that they can be a heavy management and accounting burden.

Permanent co-production, such as that considered by Bristol's Old Vic with the Gloucestershire Everyman Theatre, Cheltenham, might not only share production costs but could also enable wardrobe and workshop departments to merge.

Birmingham Repertory Theatre was near closure in the late Eighties but has been turned into a viable operation thanks to a big increase in financial support from the city council and a more commercial approach. The theatre has entered into co-productions, raised ticket prices, increased sales, shed staff, sold a catering franchise and cut back on new writing and development work. But the city council has just warned the theatre to expect at least a 6 per cent cut in its pounds 820,000 grant.

John Stalker, executive producer at the Birmingham Repertory, says that over the next couple of years a lot of theatres will warn of closure, only to be pulled back from the brink. Mr Stalker believes many councils may be forced to consider allowing local theatres to lose their cherished independence as they look for further cost savings.