Artistic director Edward Hall — accompanied by wife Issy van Randwyck and the chubby new baby who goes everywhere — and executive director Greg Ripley-Duggan threw a breakfast bash at Hampstead Theatre yesterday for sponsors, friends and patrons.

As I live fairly nearby and fancied a free croissant — and act as drama adviser to the John Lyon's Charity which has supported the educational and youth theatre activity for some years — the least I could do was go along and hear what they had to say.

Basically, they're slightly up against it. Camden Council has withdrawn all its support — £74,000, plus the free rates privilege (which will cost them another £5,000 minimum) — and they need to replace that money, and then find some more, to match their aspirations.

It doesn't sound all that much to me, but the more important loss is the confidence of the local council. Hampstead lost that along with a large part of its predominantly local audience in the Anthony Clark years — which weren't brilliant but have been unfairly over-maligned in retrospect — and it needs to regain the confidence of the community in a general, as well as practical, sense.

There are signs that this is happening. In the past sixteen months, Hall said, the theatre has produced 41 shows in total (including short runs downstairs), 21 of them premieres, selling 119,000 tickets. Nina Raine's NHS play, Tiger Country, which had done the rounds of other theatres before being plucked by Hall, was the fastest-selling show in the theatre's history, he claimed.

Although the theatre is on a four-year funding deal with the Arts Council, and seems to have done something about its chronic over-staffing (Hall says there are now just twenty people on the payroll), he sounded desperate: he pleaded for all present to sign up as patrons, or at least become "friends," in order that he and Greg can continue to do things that are "slightly out of reach" which, he implied, are the only things worth doing.

One of them will be Mike Bartlett's stage version in May of Chariots of Fire, commissioned for Olympic Year, and involving a cast of 22 actors who will occupy a totally reconfigured theatre, a sports stadium designed by Miriam Buether with a split revolve.

The theatre is totally adaptable -- it even has an orchestra pit which Hall will bring into play at some stage, perhaps on his co-production with ENO in April of Jakob Lenz -- but exploiting it costs a great deal of money. Even without doing that, Hampstead has been noticeably profligate in its design budget of late; or, at least, it always looks that way.

"We are a small theatre, " said Hall, "but we are bucking the trend; we are thinking big." Like his father, Sir Peter, he talks fluently and passionately, and without notes, but with more of an Estuary, or Mockney, drawl than his Dad.

He confessed that he had received other offers to run other theatres, but Hampstead was the one job he had wanted. Why? Because twenty years ago, he was allowed to direct a play in the former Portakabin premises just around the corner about a girl who shut herself up in her room and died. Nobody else had wanted to know, but he found a new home at Hampstead, liked its audience, its way of working, its bar and its locality.

And of course he can programme a suitable London date for his Propeller all-male touring Shakespeare company, who are bringing their Henry V and The Winter's Tale to Hampstead in July. In mentioning them, he gave further evidence of recessionary knock-on: the company has just lost five of its key European tour dates because of the Euro crisis.

He was asked why the new plays performed downstairs, funded by the Peter Wolff trust, weren't reviewed. (In fact, the last one, No More Shall We Part, featuring Bill Paterson and Dearbhla Molloy, was reviewed by the Daily Telegraph: who asked the same question!) Hall said the actors, who had just three weeks rehearsal and a per-show budget of £3,500, would not do these plays except in "closed" circumstances. I think that policy has to be re-thought, although critics have quite enough on their plates already.

The theatre's putting up a new website, with a live blog, in April, and wants to add a podcast if they can find the time and personnel to manage it. Then we all went back to the bar for coffeee and pastries. The sun came out. It was a lovely winter morning.