The Arts Council has defended its decision to withdraw a £324,000 grant from Birmingham Opera Company, stating it has spent five years urging the organisation to seek additional funding.

Sally Luton, West Midlands regional director at the Arts Council, says in a letter to The Birmingham Post today that concerns remain about the company's financial model and business operation.

The Birmingham Opera Company, which last year presented a co-production of La Traviato to almost 10,000 people at the NIA, is facing an uncertain financial future and possible closure following withdrawal of the grant. Ms Luton pointed out the company received a £150,000 Arts Council award in 2002, and warned it must move towards a "stable operating model".

She added: "Since 2002 we have repeatedly made the point to the company that they should seek additional sources of funding just as every other arts organisation in the country has to do."

Ms Luton said she was keen to talk to the opera company to see how its work might be supported on a project by project basis.

But Birmingham Opera Company general manager Jean Nicholson has warned such an approach would not work. She doubted if the company could survive if it had to apply for Arts Council project grants, which are capped at £100,000.