Horrified, shocked and outraged are just some of the words local residents have used to describe last week’s sad news that east London’s biggest theatre, the Hackney Empire, will temporarily close its doors in January.

Severe financial difficulties have forced the theatre’s board of directors to take the decision, which will see “significantly reduced activity” in the main theatre for six-to-nine months, with most of the 30-full-time and other casual staff facing redundancies. The education and community work will continue, and the Marie Lloyd Bar, with it’s live comedy and music programme, will remain open.

Despite fears for the future, interim chief executive Claire Middleton, who replaced artistic director Simon Thomsett in the post last month, insists this move does not spell the end for the Empire, but conceded that their business model was “essentially not working” and a “period of reflection” was needed.

She says: “If we don’t cut back on activity and take stock, that’s when there would be a danger of closing forever. When Aladdin closes there will be reduced work on the main stage and we will open again properly with the pantomime in 2010.

“We are saying, hang on a minute, we can’t afford to keep doing what we are doing. It’s not working. Let’s just stop and pause. Stop spending money in a way we can’t afford and find the best theatre for the residents of Hackney.”

Designed by renowned Victorian architect Frank Matcham and first opened in 1901, the Grade II listed building has faced closure once before, in 2001. A campaign led by Griff Rhys Jones, who still sits on the board, Sir Alan Sugar and the late Harold Pinter saved the theatre from demolition, and in 2004 it re-opened following a £19.5 million restoration project.

The Arts Council England, whose funding makes up 15 per cent of the building’s income, explained that the venue is facing “challenges on two fronts”, with historical debt dating back to the restoration project, coupled with an annual operating deficit.

A spokesperson says: “We want to see our historic investment maximised and for there to be a flourishing, healthy Empire that goes from strength to strength. Unfortunately, in the mean time it is uncomfortable and there needs to be this unfortunate but necessary measure. We applaud the board for their courage and commitment.”

A spokesperson for Hackney Council, which also provides funding for the venue, adds: “Hackney Council and the Arts Council are working together to provide a package of support to ensure the Hackney Empire is able to recover from these difficulties and return to a full programme as soon as practically possible.”

A champion of multicultural arts and comedy, and a cultural icon to the residents it serves, the sudden news has sent shock waves through the community.

An actress I spoke to outside the Empire tells me: “This theatre is unlike most theatres, the audience is completely alive. It’s theatre as theatre should be, so I was horrified when I heard the news.

“A whole year is a long time and a lot of audience members drop off, there is a lot of community you are not reaching in a year. They fought so hard to keep it open, it seems really tragic.”

As for reasons, people in the bar at the theatre pointed to “bad management”, “dumbed-down performances”, and “a lack of funding” for the decision, while others suggested that the Empire should put on more music gigs, noting the sell-out success of Madness last year.

But as debate rambled on, the overall feeling was one of nostalgia as memories were shared and fears for the future discussed.

“It’s a beautiful theatre,” one regular remarked, “and it would be sorely missed. I really do hope that this isn’t the beginning of the end.”

Aladdin runs at the Hackney Empire, Mare Street, Hackney, from Saturday, November 28, until Saturday, January 9. Tickets: 020 8985 2424 or www.hackneyempire.co.uk