As it emerged that The Word, a 10-day festival had suffered heavy losses because of poor ticket sales, the director of a rival event said he "could not see the point" of a London festival.
More than 60 authors, including Germaine Greer, Martin Amis and Joseph Heller, who appeared at the festival in March have yet to be paid.
Bing Taylor, the chairman of the festival, admitted yesterday that estimates of ticket sales had been over-optimistic. The trustees were due to attend a meeting last night to discuss the future of the festival.
But Humphrey Carpenter, a director of the Cheltenham Literary Festival, said: "It seems to me that London is probably not the right place for a literary festival because there are so many events already going on with bookshop signings and such."
Mr Taylor said that pounds 37,000 had already been pledged by members of the festival council and other supporters and only pounds 13,000 remained outstanding.