The line was opened for service in July

The Weardale Railway runs trains on a five-mile stretch of restored track in County Durham, which had been unused for 10 years.

The �5m project won cash from regional development agency One NorthEast and the Heritage Lottery Fund among others.

But the directors of Weardale Railway Ltd have admitted a short-term "cash flow" problem.

The project's 30 full-time staff have been told they may not get all their pay over Christmas.

The number of passengers has also fallen about 12,000 short of what was expected by the end of the year.

Problems have also been compounded by wrangles associated with buying up land linked to the rail line. This, in turn, has delayed a planned �300,000 subsidy being paid to the project by the Heritage Lottery Fund.

In a statement, Weardale Railways Ltd said: "We have some short-term issues regarding cash flow.

"We have already been working with consultants on a revised business plan, which our funders are currently reviewing.

'Future success'

"We hope to resolve the issues by Thursday and maintain the success we have already achieved for future years."

A spokesman for One NorthEast said: "A meeting has been held between funding partners of the railway to discuss future funding and how to address any cash flow problems that may have arisen.

"We are fully supporting of the management and its efforts to ensure a robust business case of this socially important scheme.

"As a funding partner we have financed the scheme with an agreed package of �940,000.

"In an effort to help ensure the future success of the project, a business consultant has been appointed to work with Weardale Railways Ltd on a short term assessment of its business plan."

The railway had to end its summer season earlier than planned because of technical problems with a steam engine.

The 50-year-old engine's steam injection system has been given an overhaul and its boiler has been washed out and was brought back into operation for a series of special Christmas services.