When Britain's Royal Shakespeare Company packed up its costumes, stored its props and turned off the lights in its two London theaters recently, many feared the houses would stay dark for good.

The company, a leading showcase for Shakespeare and contemporary drama, said it was abandoning its London home in the Barbican Arts Center for four months because it could not pay its bills.Funding difficulties have gnawed at the fringes of British drama for years, threatening many regional groups with closure. But now the crisis has hit London's prestigious West End.

"Try as we might, we cannot be in a situation where our revenues are merely enough to ensure our survival," Royal Shakespeare Company artistic director Terry Hands told a news conference earlier this year.

The company's main home is now in the English town of Stratford-upon-Avon, birthplace of William Shakespeare.

It plans to reopen in London in March, but only if the government increases its grant to cover a debt of $5.9 million, a spokeswoman said.

Government cuts and the growing reluctance of businesses to sponsor culture in a recession have left arts groups wondering how to maintain their repertoires, let alone their buildings.

The Arts Council, which administers a government subsidy to arts companies, estimates that its 160 clients will be $33 million in the red by the end of 1990.

The Liverpool Playhouse, a northern repertory theater, faces $983,000 debt and possible closure after playing continuously since 1911.

"Inside, the building looks wonderful. It's a magnificent proscenium-arch auditorium," said the Playhouse's administrative director, John Stalker. "But we have leaky roofs, we need to redo the wiring and plumbing. The capital problems remain."

The Royal Shakespeare Company's London shutdown sparked vigorous debate over who should pay for culture in Britain.

Critics posed the question: Are the arts a birthright or a luxury for the rich?

Some say theater is lucky to receive any public subsidy at all. In the United States, where live drama survives largely thanks to private funds, many artists complain that fear of offending their backers jeopardizes creative independence.

"You risk providing something that reverts to standard type, to please the bejeweled wife of the idiot that gave the money," said opera and theater director Jonathan Miller.

The United States spends comparatively little on public arts subsidies.

The Policy Studies Institute, an independent research body, says latest figures show Britain spent $19.25 per capita on the arts in 1987, while France gave $10.90 and West Germany $12.20. The United States spent $3.90 per person.

Some question why the theater needs more money when it maintains such rich variety already.

London boasts more than 40 commercial shows, from Chekhov and Strindberg to blockbuster musicals and the Agatha Christie mystery "The Mousetrap," now in its 39th year.

Much innovative work emerges from community halls and airless rooms above pubs on the "Fringe," often for no pay.

But even West End commercial producers are asking who will provide the talent and training they depend on if regional theater is allowed to wither away.

The office of Arts and Libraries announced recently that next year's central government subsidy would increase by 11 percent - more than expected - to $380 million, giving the Royal Shakespeare Company hope it might just be saved after all.

The Conservative government, often accused of neglecting Britain's cultural development in favor of commerce, has backed a successful scheme to involve businesses in the arts.

The Association for Business Sponsorship of the Arts expects $69 million in commercial support for the arts this year.

Sponsors, for their part, expect visible results. Many are happy to help companies take shows abroad, or introduce less affluent audiences to the classics, but few want to foot the bill for a leaking roof or actors' wages.

"Sponsorship is not a substitute for core funding," says Ian Rushton, head of Royal Insurance, which backs the Royal Shakespeare Company.

Drama people say no single cash handout can save the industry. They say they need reliable long-term funding.

"The danger is, when the crisis is over, if these cuts continue, theater will be merely a memory of the past," popular actor Michael Cashman said at the recent launch of a campaign to save Britain's drama heritage.

He and others say that regional theater can no longer maintain traditions of training new talent.

"One of the casualties is investment in young actors, in new writing, in music, all skill levels throughout the theater," said Stalker of the Liverpool Playhouse.

"Regional theaters simply won't be able to afford to risk a big show, whether it's Shakespeare or a musical," said John McPherson, marketing manager of northern England's Harrogate Theater. "It's a shame because there's huge demand."