Organisers of this year's Womad festival - at Charlton Park near Malmesbury - are desperate for clear guidance from the government.
Peter Gabriel says the government needs to do more to help the industry amid the nation's still uncertain release from Covid restrictions.
"Without immediate government intervention, the festival industry is on the brink of collapse," he said.
The Genesis musician, who co-founded the world music festival Womad in 1980, said the organisers are faced with “one very difficult and heart-wrenching decision” about whether the event can go ahead this year.
He says "millions of pounds of investment and the livelihood of around five thousand people are at stake."
Womad, which gives an annual boost to Malmesbury's economy, is poised for July, three days after Covid restrictions are due to be lifted in England.
Several major festivals, including Glastonbury and BST Hyde Park, have been axed for the second year running.
Peter Gabriel and his team last night (June 23) said that, unless more guidance is given, Womad 2021 will have to be cancelled too.
He said: "Without immediate government intervention, the festival industry is on the brink of collapse. That doesn't mean cash; it means providing the certainty to enable us to deliver festivals, guidance on safety, and an understanding of their timing affects us in the real world.
"At the end of this week, Womad will be faced with one very difficult and heart-wrenching decisions. Millions of pounds of investment and the livelihood of around five thousand people are at stake.
"For the last fortnight, we've been asking the Government, in public and private, for clarity on what the ‘Terminus Date’ means for festivals and, more importantly, for the essential insurance we need to reduce the risk of proceeding now no commercial insurance is available."
Gabriel, who started out as the lead singer in Genesis before launching a solo career, added: "Several pilot events have been successfully run over recent weeks. But, like other festival teams - we need to be told what that research means for Womad - Are we permitted to run the festival, and under what conditions?
"We struggle to understand why these trials took place if the Government can't now tell us the results and how that will affect all of us.
"Once again, we are not asking for handouts from the Government; we received Arts Recovery Fund support last September, for which we are all extremely grateful. That funding was used to recover from last year’s losses and had to be spent by March this year; the Government made clear it shouldn’t and couldn’t be used for this year’s event.
"The Government also says it continues to explore ’what further support, including issues around securing insurance, may be required when the culture sector can reopen.’ At the same time, the Government promises to keep exploring most independent festivals are fighting for survival like fish left out on the beach when a simple insurance scheme would get us back in the water.
"Unfortunately, this decision is already too late for some; Womad has only got this far thanks to the goodwill, generosity and support of our festival community who’ve hung on yet another week since ’Freedom Day’ but regrettably unless something changes by the start of next week, we will be forced to cancel Womad 2021."
Earlier this month Download Festival went ahead with around 10,000 music fans at the rock and metal music event in Leicestershire – although the capacity was significantly reduced from its normal attendance of 111,000.
The festival was a Government pilot event for the return of live music.
Latitude, which is run by Festival Republic, the company behind Download Festival, announced on Friday it would be going ahead between July 22 and July 25 in Suffolk.
However, Lake District event Kendal Calling has cancelled its 2021 edition, due to take place from July 29 to August 31 with headliners including Stereophonics and Dizzee Rascal, citing a lack of guidance from the Government.
Glastonbury will also not take place this summer after it was cancelled for a second year in a row because of the pandemic.
Mass events are currently scheduled to be allowed to take place from July 19 when coronavirus restrictions ease.
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