Sue Pitts, chairwoman of the DCA board, said: “The work the company has done over the years has become an intrinsic part of Durham’s cultural life.

“The initiatives developed with hard-to-reach groups, some of which has won awards, may well be lost. That would be tragic because art can truly be transformative.”

Creative director Suzy O’Hara said: “I would like to thank all of the artists, communities and our supporters who have helped Durham City Arts achieve so much over the past two decades.

“I am very proud to have been part of a company that has created such a legacy of truly engaging people with great art and arts experiences.”

The company will formally close on March 31.

Nick Whitton, head of commissioning with Durham County Council, said: “The county council is having to make tough decisions about the level of support it can offer for the future in all areas including the arts.

“Reductions in funding across the sector, combined with the increased need to ensure improved value for money, mean organisations are having to ask themselves hard questions about their viability and it is regrettable that DCA feel they do not have a financially secure future.”

The DCA announcement came a week after the council announced plans to hand over flagship theatres and museums to a charitable trust.

Facing cuts of nearly £150m over the next five years, the Labour-led authority is contemplating placing dozens of leisure and culture assets into a not-for-profit trust as early as next year.

They include flagship venues such as Durham’s Gala Theatre, Freeman’s Quay leisure centre, Durham Light Infantry Museum, Bishop Auckland Town Hall, Consett’s Empire Theatre, Killhope: the North of England Lead Mining Museum and Hardwick Park, Sedgefield.