Seafront traders may not return to the Worthing Festival if low takings continue, according to a council report.
Bad weather forced customers away this year.
The running of the annual event had been largely taken over by Worthing Borough Council after Worthing Seafront Festival Ltd pulled out over concerns about insurance costs.
The three-day event started on July 25 but force eight winds and driving rain meant a display by the Red Arrows and an RAF Tornado were cancelled.
A RAF Hawk display on July 26 and a Black Knights parachute drop the next day were also called off.
A Worthing council report said: "A number of traders suffered very considerably reduced revenue, although this does not directly knock on to the financing of the event.
"Nevertheless, this may have an impact in future, with traders being more reluctant to pay to come to Worthing."
Worthing's executive is meeting on September 1 to decide how the 2004 festival should be run.
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