The Merchant Of Venice, Festival Theatre. Chichester

For its season of Venetian-themed plays, the main stage of the Chichester Festival theatre has been turned (by Alison Chitty) into a watery installation - gleaming blue pools casting wavy reflections and intersected with blocks of wooden decking that can be easily shifted to alter the shape of the acting area. At the start of Gale Edwards's fluent modern-dress production of The Merchant of Venice, a line of businessmen troop in and launch paper boats on to the water - a symbol of the venture capitalism that underlies Antonio's credit and emphasises the riskiness of his deal with Shylock.

At the end of the production, the image is recalled when Philip Quast's burly, handsome Antonio disconsolately tosses another piece of paper on to the water. It's not a toy boat this time, but the letter Portia has just given him outlining the strange accident whereby three of his argosies have suddenly come to harbour bursting with riches.

Left alone after all the paired-off characters have entered the house, this Antonio feels that glad tidings on the financial front are a bitterly inadequate consolation prize. He wanted to be the most important person in Bassanio's affections and he has had to cede that place to Portia. It's a deft touch because it reminds you how often, in this mercantile society, money has proved powerless to do good. Offered multiples of his three thousand ducats, Shylock will not budge from demanding his pound of flesh. Palmed off with the profit from three argosies, Antonio experiences unrelenting desire for Bassanio.

Though the look of the piece is updated, Edwards has happily not gone in for one of those merchant-banker settings that make one feel that, given the prevailing ethos, it's a bit rich of the Christians to castigate usury. The modern dress here simply gives an added immediacy to a set of lucid, keenly considered performances.

An immensely sympathetic performer, Desmond Barritt, as Shylock, presents a dignified figure driven to deep depression by unrelenting racist abuse. He lets you see how paranoid over-protectiveness has warped his relations with his daughter - a tender embrace one moment shifting to peremptory roughness the next. I could have done without the music that stirs under some of his speeches (such as "Hath not a Jew eyes?"). Barritt's intensity does not need such sentimental reinforcement, which gives those passages a dreaded set-piece quality. His eloquence is left to speak for itself in the court scene, and no one, watching him collapse to his knees with his weighing scales tumbled beside him, could deny that the character, for all his previous vindictiveness, is left broken beyond his deserts.

Niamh Cusack's Portia has a captivating wit and intelligence, her Irish accent sharpening the tartness of her sallies. From her first entry, when, in a pointed overlapping of scenes, she and Nerissa symbolically walk through and break a handshake between Antonio and Bassanio, we are alerted to the future competition between the heiress and the homosexual merchant.

Later, as Patrick Robinson's Bassanio reads her the letter from his friend, Cusack's expression slowly and beautifully darkens. That degree of passion and self-sacrifice disturbs her. It's characteristic of the intelligent shaping of Edwards's Merchant that she places the interval shortly after this, so that each half ends with the focus on a lone, brooding figure: first Portia, then the defeated Antonio. With Alexandra Moens's Jessica racing off in tears when insensitively handed the deed of gift extorted from her father, this is a trenchant and properly troubling production.

In rep to 2 October (01234 781312)