Financial drama at RSC eased as debts are reduced by half

Debts incurred during the Royal Shakespeare Company's rash departure from its London home at the Barbican will be more than halved by the end of the financial year.

About £1.5m will be slashed from the accumulated deficit of £2.8m which faced Michael Boyd when he took over after the sudden departure of the former artistic director, Adrian Noble, last year.

Mr Boyd, before the RSC's annual general meeting in Stratford-upon-Avon yesterday, said the reduction of the deficit had been achieved by cost-cutting, including seven redundancies, and by "a more prudent approach".

The cutbacks mean the company can afford to establish a new London base next year, instead of the Barbican Centre, as a venue for the transfer of productions from Stratford-upon-Avon, he said. But there is still no confirmation as to where that might be.

The company has been forced to admit that Mr Noble's plans for greater flexibility by leaving the Barbican for a peripatetic existence in the West End were a mistake. They proved expensive and tested audience loyalty.

In the annual report published yesterday, Lord Alexander of Weedon, the retiring chairman, said: "It is clear having a theatre in London with an RSC flag up for part of the year is important for our audiences."

The move also cost the RSC a subsidy of £3m a year from the Corporation of London, which funds the Barbican, a source of income which it has so far not replaced. But the appointment of Mr Boyd after Mr Noble left in the face of fierce criticism has revived company spirits, not least because the proportion of expenditure being spent on productions is increasing.

Mr Boyd said: "To ensure artistic freedom for the RSC we must balance the books first. It's never easy cutting costs, but we've made great progress this year. Deficits of almost £3m are bad news for the spirit of adventure I want to project in the rehearsal room and on stage."

The company intends to eliminate its deficit within four years. But the annual report showed it increased by more than £440,00 in the year to March. Many productions did better than expected in 2002/03 but its stint at the Roundhouse in north London was "disappointing". The cost of setting up the Roundhouse contributed to a £1m increase in the accumulated deficit in 2001 and 2002.

The company was also hit by a decline in the number of productions of Les Misérables worldwide. The RSC earns income from the rights to its original staging of the musical.

The first season programmed by Mr Boyd as artistic director is now getting under way. Lord Alexander said it looked thrilling. Antony Sher is to play Iago in Othello, Corin Redgrave will be King Lear and Toby Stephens, the son of Dame Maggie Smith, is to tackle Hamlet.

But the RSC is far from having resolved its problems. It is not clear what will happen to Mr Noble's other plan, to demolish the old Royal Shakespeare Theatre in Stratford and build a new one.

Plans have been put on hold to allow Mr Boyd to get to grips with the complex planning considerations. "We are acutely aware of the need to deliver the right [theatre] spaces which can be both excitingly operated and financially viable," Lord Alexander said. "It is quite a responsibility to try to get it right for the best part of 100 years to come. We need to preserve the best of the past, but create an iconic world heritage site for the future."

Lord Alexander said the buildings in London and Stratford needed to complement each other to allow the transfer of shows. The London base could be used for up to five years while plans for Stratford were decided. "A permanent London theatre will need to reflect the way we redevelop our theatres in Stratford," he said. "It is important we make the right decision."