A FLAGSHIP £14m arts venue has been plunged into financial crisis - just two weeks after its official opening by the Queen.

The running of Durham's Gala Theatre was in the hands of the city council last night, following a last-minute rescue deal aimed at securing its immediate future.

Council chiefs were forced to step in when it became clear the management company, which had a three-year contract to run the council-owned venue, was facing financial collapse.

The news, which comes just six months after The Arc venue in Stockton went to the wall, will come as an embarrassing blow to the arts world in the region.

The Entertainment Team (Durham) Limited, which ran the prestigious venue, is thought to owe at least £100,000 to creditors, but the final figure could be much higher.

It ceased trading at midnight on Wednesday and is set to be placed into voluntary liquidation.

Durham City Council said there was no threat to the future of the Lottery-funded 550-seat theatre, part of the £30m Millennium City complex.

The wages of its 60 full and part-time staff will be met by the authority and all are said to have been paid up to date.

Council chief executive Colin Shearsmith brushed off suggestions that the authority, which appointed the management company, was to blame for the turmoil.

He said: "If the council buys chairs from a company that goes bust, should we blame ourselves for that? I don't think so."

But last night, questions remained over whether debts incurred by The Entertainment Team would be paid and over the long-term future of the Gala, which opened its doors in January. The Gala's management team, understood to have an annual budget of about £1m, had struggled to recover from a disastrous launch event.

Mr Shearsmith said it had incurred "excess start-up costs" when plans to screen the opening event, featuring chart-topping boy band Westlife, in a marquee had to be scrapped because of poor ticket sales.

The council is taking over the Gala for a 13-week period, during which time various options about its future management will be assessed.

He said: "The future of the theatre has never been in doubt. The Entertainment Team has brought a lot that is good to the theatre and I am disappointed and sad that it has financial difficulties."

Mr Shearsmith insisted that no extra cost to the taxpayer would be incurred. The theatre was even in line to make a small operating profit and meet all its costs, he said.

Durham City Council earlier this year gave the management team an interest-free loan of £75,000 following a request for assistance, which is yet to be paid back.

The Northern Echo, itself a creditor, has also taken calls from a number of creditors claiming to be owed thousands of pounds.

One man, owed £1,100, said: "I should have pulled the plug sooner, but was promised the money was in the post. I am absolutely livid."

Just this month, The Entertainment Team (Durham) was subject to a county court judgement in Northampton, forcing it to hand over £3,785 to an unnamed creditor.

A Durham City Labour councillor, who did not want be named, said: "What has happened is no surprise to me. When the firm asked for the loan I thought it was on the rocks - if a firm is doing well it doesn't do that sort of thing."

Rumours have been rife in the region for the past two weeks that the Gala was in financial difficulties, but these were denied by the theatre.

Directors of The Entertainment Team were unavailable for comment last night.