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London's Tricycle Theatre has backed down on objections to funding for the UK Jewish Film Festival (UKJFF), which saw the venue refuse to host the event.
The theatre announced it could not support the event while the crisis in Gaza was ongoing, as it is sponsored by the Israeli government.
The festival will not go ahead as originally planned in November, but it is hoped it can return next year.
A joint statement from the UKJFF and the theatre admits the decision provoked "considerabe public upset", and said they joined forces to tackle that.
A row has erupted after north London's Tricycle theatre refused to host the UK Jewish Film Festival because it is sponsored by the Israeli Embassy.
After the theatre said the festival should not accept funding from "any party to the current conflict" between Israel and Palestinians, the UK Jewish Film Festival said the Tricycle's demands were "entirely unacceptable" and it was taking its screenings elsewhere.
The festival was backed by actress Maureen Lipman, who said: "The Tricycle have decided to punish Jewish people in the diaspora for one view of what is taking place in the Middle East and that is quite unacceptable."
National Theatre director, Nicholas Hytner, backed the Tricycle's stance, saying they "could not have made clearer their commitment to Jewish culture or their desire to host a festival that would have included films from all over the world, including Israel."
"It is entirely understandable that they felt obliged to insist that no government agency should sponsor the festival.
A theatre has refused to host the UK Jewish Film Festival while it is sponsored by the Israeli Embassy amid the ongoing crisis in Gaza. The Tricycle Theatre in London, which has hosted the festival for the past eight years, had been due to screen at least 26 films as part of the event in November.
But Indhu Rubasingham, artistic director of the Tricycle, said the festival should not accept funding from "any party to the current conflict" between Israel and Palestinians. She said the theatre offered to use funding from its own resources to replace the festival's sponsorship from the Israeli Embassy in London. But the UK Jewish Film Festival (UKJFF) said the Tricycle's demands were "entirely unacceptable" and it was taking its screenings elsewhere.