The beleaguered Scottish dairy industry received a welcome boost yesterday with the announcement that First Milk is to build a new creamery on the Mull of Kintyre.

The beleaguered Scottish dairy industry received a welcome boost yesterday with the announcement that First Milk is to build a new creamery on the Mull of Kintyre.

It will replace the existing Campbeltown creamery, built in the 1820s as a whisky distillery before being converted to a cheese-manufacturing facility. First Milk said in November 2007 it was in talks with the Scottish Government over its plans and has decided it was not economic to modernise and that a new-build was a better option.

Funding for the new creamery will come from the sale of First Milk's existing creamery site to Tesco, up to £3.9m from the Scottish Government in its largest-ever grant for a dairy company in Scotland, with the balance coming from First Milk's own funds.

The creamery is currently supplied by 42 dairy farms and the dairy sector in Kintyre is worth £11m a year to the local economy. The development should secure the future for those dairy farms as well as 100 jobs in the locality.

In addition to having increased capacity, the new factory will provide processing efficiencies and allow the treatment and processing of whey, which is currently a waste product.

The good news follows on from the recent collapse of Dairy Farmers of Britain (DFoB) south of the border.

First Milk is the largest dairy co-operative in the UK, handling approximately 1.8 billion litres of milk per annum from 2500 members. Milk volume was recently boosted by 260 million litres when more than 500 former suppliers of DFoB switched to First Milk.

The collapse of DFoB could prove to be no bad thing for the domestic cheese market, as discounted distress sales of cheese by the ailing company had been causing disruption to an already fragile market place.

NFU Scotland vice-president Allan Bowie welcomed the announcement, adding: "Confidence levels amongst milk producers are in need of a boost and this significant investment in modern plant to produce an award-winning product maps out the route to reinvigorating the dairy sector across Scotland."