A network of locally sourced food providers in the Highlands has suspended its services and will lay off staff after regional enterprise chiefs axed a £90,000 funding lifeline.

A network of locally sourced food providers in the Highlands has suspended its services and will lay off staff after regional enterprise chiefs axed a £90,000 funding lifeline at a time when the issue is a key plank of the Scottish Government's rural policy agenda.

Highlands and Islands Local Food Network (HILFN) is an umbrella group of 100 food producers, crofters and community groups formed with the aim of making community sourced supplies more widely available.

However, Highlands and Islands Enterprise announced that it would not renew its core funding, which will result in the loss of all four staff employed by HILFN on Friday.

Environment and Rural Affairs Secretary Richard Lochhead has insisted that Scotland's food strategy should focus on stronger local networks.

HILFN leader Jo Hunt described the suspension as a "sad day" for local producers and that the four-year-old business could no longer continue because the funding was 50% of its turnover.

He added: "We have been working for six months with HIE to create a plan for the future, which was projected to create seven jobs, bring in 400 new members and make local food available in more than 100 outlets. Their decision comes as a huge disappointment, particularly as support for local food is a key part of the Scottish Government's new National Food policy."

Network member Jock Scott, of Broombank Farm, near Nairn, Inverness-shire, added: "HILFN has done more than anyone to promote local food in the region and help raise the profile of local food."

He highlighted the irony of losing a vital source of local produce when eating local is top of the political agenda.

Stornoway Farmers' Market organiser Ruaraidh Ferguson, who is also development officer for Lewis and Harris Horticultural Producers Group, said: "This decision is a devastating blow ... and something which needs to be revised as soon as possible."

HIE said it had provided a three-year funding package for HILFN, but that with increased emphasis on working with local businesses who wished to trade beyond local markets, it could not offer the same support after the deal ended in September last year. The organisation added that it provided six further months of "transitional" finance to allow HILFN to find alternative funding.

Highlands and Islands Labour MSP Peter Peacock, who has been critical of £50m cuts in HIE's budget, said: "In this case, the policy restrictions on HIE are preventing an organisation helping meet a strategy to improve local food production and marketing."

A Scottish Government spokesman said officials were investigating the situation. "The suspension is an opportunity for everyone involved in local food in the Highlands and Islands to take stock and think about how it is supported at a strategic level. There is scope for local authorities, HIE, Scotland Food & Drink and local food groups to come together to consider this."

HILFN worked with local groups to supply food direct to customers. It provides free advice to farmers, crofters, growers and community groups.

Its website, hilocalfood.net, has 40,000 visitors a month. The group also had a gates open day for producers and set up a food apprenticeship scheme which has helped 17 farmers and crofters create locally based food businesses.