It is a minor miracle that for 35 years, a former mortuary in Hampstead has somehow avoided the clutches of property developers and has instead served the people of north-west London as a theatre.

It is no thanks to the Arts Council, which gives no subsidy, and no thanks to the National Lottery, which provides no funding. Give plenty of thanks though to Brian Daniels who, 12 years ago, sunk his private pension fund into the 84-seat venue known as the New End and has somehow managed to keep it going ever since.

“It’s been a terrible, terrible struggle,” admits the 56-year-old owner and artistic director who, to mark the theatre’s 35th anniversary, took no fewer than 12 New End shows to the Edinburgh Festival this year. And as is often the case with New End offerings, many of the shows had strong Jewish themes — from Dan Clancy’s Holocaust play Timekeepers to the Jewish mother play Mother/Son by Jeffrey Solomon and Daniel Cainer’s Jewish Chronicles.

But the New End’s tiny stage has also seen some big names tread its boards — Susannah York, Jerry Hall and Steven Berkoff. And when you add to these the stars Daniels has brought over from America, albeit to the larger Shaw Theatre in King’s Cross — names such as Elaine Stritch, Eartha Kitt and Michael Feinstein — there has been no shortage of big box-office glamour associated with the venue.

“When I first started at the New End 12 years ago, an audience of six was a good number,” says Daniels. “And what I have learned over the years is that if you put on a show that people want to see, and if you have a strong marketing department, then audiences will grow and grow.” The New End has an audience whose loyalty would be the envy of any theatre in the country. I have been to there on many a rain -soaked Sunday afternoon to find the place heaving with madly keen and mostly Jewish theatre-goers. One of them told me that he saw so many familiar Jewish faces in the audience that he thought he was in synagogue. Daniels puts much of this loyalty down to giving the public what they want.

“I’ll tell you one half of the equation to having a show that sells well,” he says. “The writing has to be challenging and artistically important. But it’s like a shop. You have to sell what people want to buy.” This, he adds, is where the much fancier but recently criticised Hampstead Theatre went wrong.

“I know they’re changing their artistic director now, says Daniels referring to the Hampstead’s outgoing Anthony Clark. “Over the last few years a lot of the audiences have fallen away. They’ve been doing plays that don’t seem to have an interest or relevance for the target audience, which is north-west Jewish London.”

And there is the rub for north London theatres. They have on their doorstep what is widely recognised to be the most committed theatre-going audience in the country — Jews. This remarkable phenomenon is recognised throughout the industry. Playwright David Hare once said that the reason audience numbers of West End shows fall after the first few weeks is because by then all the Jews and gays have seen them.

And this is why artistic directors often keep an eye on Jewish audiences when deciding what play to put on. Especially if their theatre is in north-west London. But is there a danger of putting on a show because it is Jewish, rather than because it is good?

“There’s a tension between having it Jewish and having it good,” says Neil McPherson, artistic director of the award-winning Finborough Theatre which sits above a pub in Earls Court, west London. McPherson ran the New End before Daniels took over, and was artistic director when Daniels put on his first New End show, Arnold Wesker’s When God Wanted a Son.

“There’s also a tension between having it Jewish and keeping it interesting for people who aren’t Jewish,” he adds. “Because if you ghettoise too much then the national press start losing interest, and if that happens you can’t get the actors, and you can’t get the directors, or the writers.”

At the New End that tension has produced good shows — such as last year’s rediscovery of Lionel Goldstein’s Halpern and Johnson, which was very good — and bad. But sometimes, bad at the New End can be a particular kind of bad — the kind which is staged not because the theatre believes in a show’s merits, but because its creators have the cash to put it on. These vanity projects may pay the bills — it costs about £4,000 per week to stage a show at the New End — but the price to a theatre’s reputation can be heavy, and there are many good productions by independent theatre-makers that could never afford the New End.

“Part of the problem with the New End is that the rents [charged to shows to use the venue] are so high,” says McPherson. “For example, at the Finborough we charge £1,200 per week. We deliberately keep our rent at break-even to attract the best possible work we can.”

Daniels points out that pub theatres such as the Finborough may be able to keep their charges low because their own rents are subsidised by pub landlords. The New End has no such subsidising relationship. McPherson in turn is quick to acknowledge that without Daniels the New End would by now have been turned into a “block of flats or maybe a restaurant”.

Daniels, who sold his employment agency business before becoming a theatre producer, is admirably open about the issue of knowingly putting on bad theatre, which is what vanity projects usually amount to. “It’s really difficult,” he says. “An audience has no way of knowing if it’s a New End theatre production or a vanity project.”

Still, the New End’s largely Jewish audience keeps coming. It must be doing something right. Is there a case for turning it into a Jewish theatre? “I’ve thought about that quite a lot recently,” says Daniels. “Certainly we get the first option of all the Jewish writing. But I think that would just preclude some work which I still want to do that is not Jewish related. And it would make the New End too much like a community venue.”

But when it comes to theatre Jews like it all, not just the Jewish stuff. “With Jews the theatre-going habit is ingrained,” says McPherson. “At the Finborough if we do an Armenian or Scots Gallic play it takes a while to get those communities interested. But a Jewish audience will come and see them all. On the other hand, it sometimes leads to laziness. If money is short or you’ve got a question mark over a particular play, you can go: ‘Oh, it’s Jewish — I know I’ll sell it’, which wouldn’t happen to the Armenian or Scots play.”

For Daniels, the struggle of running a theatre — a job which Laurence Olivier once described as like being at war — has always been worth it.

“Every play is new, and brings a new energy,” says Daniels. “It’s so fantastic when people are deeply affected. It gives me a great buzz.”