The crisis has been prompted by two failed applications for Lottery funds to upgrade the Covent Garden building, which has housed the Theatre Museum since 1987.

In 2003 The Victoria and Albert Museum, who own the site, applied to the Heritage Lottery Fund for £9.5 million to redevelop the building. In 2004 the HLF rejected the application but, according to a V&A spokesman, indicated they would receive a revised bid.

But the second application, this time for £2.5 million (over $4 million) to contribute towards a proposed £4.4 million redevelopment, was also turned down. After the second rejection the V&A released a statement saying, “The V&A recognizes the limitations of the building and that considerable funds would be needed to transform it into a space which could accommodate permanent collections, exhibitions and educational activities.”

The statement also said that that the V&A would conduct a review of “the best way forward.” Options being considered by the Theatre Museum’s trustees include separating the permanent collections from exhibitions and educational activities. Also being considered is a plan to move the collections to the V&A’s site in Kensington.

In answer to the question “Do the options include closing the Theatre Museum?," the V&A said, “We are looking at all options.”