As the 2009 festival cycle approaches, organisers are huddling down, hoping the economic storms will pass them by. However, at a time when both state funding and sponsorship for arts events is under increasing pressure, most acknowledge film festivals are bound to be buffeted eventually.

'In these times, sponsorship is not always immediately impacted because contracts are often only midway, so the real effects won't be visible for a year or two,' notes Ginnie Atkinson, managing director of the Edinburgh International Film Festival, of the time lag between events in the financial markets and their eventual impact on festivals.

'The Berlinale has not yet been affected by the international financial crises,' says Berlinale head Dieter Kosslick. 'We have stable contracts with our sponsors for the 2009 edition and regarding federal funding we are also on the safe side. It's too early to make predictions about the expected attendance since the accreditation deadline will be in two weeks. So far, interest in attending seems unbowed. We are not depressed, we are happy.'

The organisers at Berlin's European Film Market say the early signs are that industry attendance is stable. 'Everybody is coming back, more or less,' an EFM spokesperson says, though the cost of industry accreditation has been increased to 'balance the general advance in prices and maintain the ability to offer visitors the usual service'.

There is little immediate sign the annual January Klondike rush to Sundance is being affected either. 'The impact of it (the credit crunch) hasn't been felt as severely by us as it might have affected some others,' says Sundance festival director Geoffrey Gilmore.

Sundance has retained its sponsors, and screening and industry passes are sold out. However, looking ahead, Gilmore acknowledges all festivals are likely to be affected by the downturn.

'We had as many films submitted to us as we ever have. Do I think that's going to continue' It can't continue. There has to be ultimately a submission impact and a production impact. With the buyers, it's going to affect the numbers people will pay. I can't imagine that it wouldn't.'

Rutger Wolfson, general director of the International Film Festival Rotterdam, is bullish about the prospects for the 38th edition (January 21-February 1). Public funding, he points out, is stable and the sponsors are signed up for 2009.

The budget at Rotterdam is being trimmed but that - Wolfson says - is not directly because of the credit crunch. The festival has overspent in recent years and has had to dip into its reserves.

However, in the Netherlands as elsewhere, private sponsorship is becoming far tougher to rope in. Last month, the VSB Fund, the largest private donor to arts events in the Netherlands, announced it would be slashing its spending on culture by more than 50%, from $77.6m (EUR62m) to $38.8m (EUR30m) next year. Film festivals are bound to be affected by the shortfall.

'We are now in a crunch. Any activities that are dependent largely on sponsorship and similar types of funding are going to find it difficult,' notes a UK Film Council spokesperson. 'It doesn't matter whether you're in sports, arts or charity, sponsorship is feeling the pinch whether you're talking about the big high-end or small donations.'

The crunch comes at a time when many leading festivals hope to expand. Venice is busy trying to build its new Palazzo Del Cinema.

The palace has already received its first tranche of funding - $26m (EUR20m) - from the government. The building site has opened and the works proceed on schedule. 'We trustingly wait, as every year, for the contribution of the necessary resources for the next edition of the Venice film festival so we can carry out some interventions of organisational renewal,' says Paolo Baratta, president of the Biennale.

There has been talk of the London Film Festival also growing when it begins to receive the money set aside by the UK Film Council's Film Festival Fund, which has $1.8m (£1.25m) to invest annually for up to three years on up to two festivals of national and international significance.

'We didn't find any adverse effect (from the economic downturn) in terms of the last edition,' says Sandra Hebron, artistic director of the London Film Festival (whose most recent edition took place in late October).

It is yet to be decided whether The Times, whose current contract with the festival has just ended, will continue as the LFF's main sponsor. However, Hebron says 'very positive interest' in the LFF is still evident from sponsors.

The LFF, run through the British Film Institute and more than 50 years old, has deep roots. Other less established festivals may struggle. 'In a time where resources are short, there will always be certain events that find it harder to succeed,' says Hebron. 'Those that have something specific to offer will get the investment.'

An optimistic view is that festivals are all the more important at times of economic difficulty - they can help market movies, boost the profile of their host cities and encourage inward investment. 'Film is a very democratic art form. That is something that works in its favour at a time of recession,' notes Hebron. 'It (cinema) is a communal experience people are encouraged to come and share. Festivals are part of that.'

Some also believe a drop in production levels is to be welcomed at a time when the market is over-saturated.

Buyers are still busily looking for breakout films. Festivals remain the most likely place to find them. As Gilmore puts it: 'The business isn't shutting itself down. It's just trying to find ways to weather this.'