One of Scotland's leading visual arts venues is to close, as a major new report warns of increasing financial strain on artists and galleries.

Inverleith House at the Royal Botanic Garden in Edinburgh, which has been a gallery for contemporary art for 30 years, is to close as a home for modern art.

Simon Milne, the Regius Keeper at the gardens, said the institution can no longer afford to run the house as a gallery and it has to concentrate on their core work of horticulture and botanical studies.

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It is likely that the House's current show, I Still Believe in Miracles, which celebrates 30 years of contemporary art shows at Inverleith House, from 1986 to 2016, is the last of its kind, featuring work from leading artists including Douglas Gordon, Jim Lambie, Richard Wright, Ed Ruscha, Louise Bourgeois and others.

Creative Scotland, a funder of the gallery, has expressed disappointment at the decision.

Paul Nesbitt, director of exhibitions, will be retained, Mr Milne said, and art may be shown in other areas of the gardens - a popular attraction which attracts 800,000 visitors a year - but other uses will be found for Inverleith House.

Mr Milne, who said it had been a challenge for the gallery to "wash its face" financially, added: "These are hard financial times for everyone, and we couldn't afford to sustain it, and at the moment we have to focus on our core programmes, which are botany and horticulture."

The news comes on the day that Scotland's major public arts funder, Creative Scotland (CS), unveils its Visual Arts Strategy.

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Since 1994 the Scottish Arts Council and CS have given £1.5m in funding to the gallery.

Inverleith House applied for Regular Funding from CS in its last round of decisions, but was unsuccessful.

A statement from the funding body last night said: "The importance of the gallery, alongside the work of Paul and his team, to contemporary visual art and artists in Scotland cannot be understated and its loss will be profoundly felt.

"We understand the financial pressures that RBGE are under, like other publicly funded organisations.

"However, we would have hoped that the value that Inverleith House brings to the gardens, to the public, and to Scotland as a space for art and creativity could have been better recognised and result in a different decision."

As well as highlighting again the low income of Scotland's artists, the CS report warns of the damaging effects of the public sector squeeze on the art sector.

The document warns: "capacities, both human and financial, are extremely stretched.

"This has the potential to impact negatively on levels of motivation and confidence in the sector, and raises concerns about future sustainability and growth."

Scotland's visual art prowess, which has included high profile successes in the Turner Prize, and attracts 1.2m people a year to contemporary art shows, could be weakened by the financial climate, it warns.

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Amanda Catto, head of visual arts at Creative Scotland, said: "The study raises concerns about the sustainability of careers in the sector and how best to maintain the quality, ambition and reach of their work into the future - with challenges being faced by artists and other freelance professionals working across the country; challenges compounded by increasing financial pressures on the galleries, workspaces and other partners that commission, exhibit, collect and represent artists’ work."

A statement from the Royal Botanic Gardens added: "The intention is very much that we intend to retain our reputation as an art venue across the board, be it for botanical art, illustration, performance, photography, sculpture and contemporary art.

"Through this change the organisation will remove the various inevitable financial risks attached to running a high-profile gallery.

"It will also free-up resources to concentrate more fully on its scientific and horticultural research and conservation work and provide greater scope to encourage public engagement with the environment."