Farmers and food processors have said that their modernisation and expansion plans will be hit by withdrawal of the food processing, marketing and co-operation (FPMC) grant scheme for businesses to draw down cash in 2023/24.

The decision was announced as part of Scottish Government budget cuts, pointed out the Cabinet Secretary for Rural Affairs, Mairi Gougeon, when she wrote to the convener of the rural affairs, islands and natural environment committee as part of the Scottish budget process.

Her letter stated: “The committee had asked for an update on the food processing, marketing and co-operation (FPMC) grant scheme. As we discussed at the pre-budget scrutiny session, our capital spending ambitions have been impacted by global trends and exacerbated by UK Government decisions.

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"In light of inflationary pressures and wider market conditions, we have had to make hard choices to re-prioritise our 2023-24 capital budget. One of these decisions is that we will not be running a further round of the scheme for grants to be drawn down in 2023-24.

"However, we have taken this as an opportunity to review the scheme, to look at how it can best serve the needs of the food and drink industry and address the unique challenges it faces. One of the criticisms of the scheme since we have left the EU has been about the one-year funding cycle, and how tight this makes it for all concerned to apply for, assess and then undertake projects.

"We will particularly be looking at ways to extend the window for successful applicants to undertake their projects, and ensure that smaller business continue to be able to make good use of the scheme. Therefore, while grants will not be drawn down in the coming financial year, we will be looking to open applications for a new scheme to address these challenges, over the course of 2023/24.”

Martin Morgan, the Scottish Association of Meat Wholesalers' executive manager, said: “SAMW is disappointed there will be no FPMC support on offer for 22/23, given the pressures on all businesses at present, but welcome the intention to review the previous scheme with a view to making it much more business friendly in 2023/24.”

FPMC runs periodically, with a window for applications to be submitted, which are then assessed and grants awarded. The most recent application round closed in June, with the awards announced in November. Claims will be processed as the successful applicants carry out the work and submit claims for it.

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The last round of grants spent more than £10m to improve supply-chain efficiency, increase production and run feasibility studies in food and drink businesses across Scotland. A total of 33 businesses are set receive grants ranging from £16,000 to £1.4m.

Projects include capacity building for a dairy farm to meet the growing demand for its soft cheese, setting up of a new venison processing operation and installation of solar panels at a butcher premises to reduce carbon footprint and minimise electricity costs. News of a 'furlough' for the scheme will be a blow to those planning to modernise and upgrade in-farm food processing capacity, said a disappointed potential applicant.