The decision is likely to damage Britain’s ability to develop its own unmanned drones, would break a promise to invest in unmanned aircraft by the defence secretary, Bob Ainsworth, and end hopes that the range could have been developed into a world leader in a global market worth billions.

It will also give the first minister Alex Salmond fresh ammunition against the prime minister.

The downgrading will mean 125 jobs at the testing facility will go, with the same number lost again in related jobs. For the Uists’ local economy, the cuts by their main employer will be a massive blow. One in five families have employment links to the missile range.

Davies’s decision, yet to be ­officially announced, was accidentally revealed in an in-house online journal which published a job advert looking for the Qinetiq project team who will remotely “manage” the work, which will be transferred from Scotland to another of Qinetiq’s testing sites, in Wales.

The “rationalisation” of the Hebrides Range will hit Britain’s ability to develop and test new generations of unmanned aerial vehicles (UAVs) or drones, which have been described by American defence chiefs as “game-changing” in the battle to defeat the Taliban in Afghanistan.

Despite Ainsworth promising to “invest” in UAV technology that has been used to detect insurgents in Afghanistan planting deadly roadside bombs, the Ministry of Defence is set to rubber-stamp the decision by Qinetiq -- formerly the MoD’s research division, which was privatised in 2001 -- and cut the workforce in Scotland.

This will kill off hopes that Benbecula could be developed into a globally important site attracting lucrative UAV testing contracts.

Defence consultant Donald Booth, who spent 25 years with the MoD, told the Sunday Herald that the decision will “massively affect the UK’s capability in the aerospace and technology development of unmanned drones”.

New UAV technology will now be tested in the much smaller site at Aberporth in Wales -- Benbecula has a “segregated airspace” zone of 8000 square miles, the largest in Europe.

With the US defence department estimating that the global market in UAVs will be worth $55 billion by 2020, Booth said Davies’s announcement will be seen as “flying in the face of everything coming out of the Pentagon”.

As well as leaving the Prime Minister open to further criticism that he is out of touch on defence issues, the government’s decision will be seen as an own goal for Scottish nationalists.

The Western Isles MP, the SNP’s Angus MacNeil, said “Politically this finishes Labour in the islands. This isn’t a decision being taken by a commercial company like Diageo; this is a Labour government bringing devastation to the islands. It will unforgivable.”

The job cuts -- which could save the MoD £50 million over the next five years -- will have a huge impact on the island community, estimated as the equivalent of Edinburgh losing both Royal Bank of Scotland and HBOS, or 350,000 jobs being lost in London.

It could also flag up another split inside the MoD. Former defence ministers involved in procurement, including Lord Bach and Lord Drayson, have emphasised the importance of UAVs in future conflicts. Research at the smaller Welsh facility site will mean Britain remaining reliant on UAV technology imported from the US and Israel.

Qinetiq also plan to shut down their radar facility on St Kilda and, in a contradictory decision, actually double the size of the exclusion danger zone that keeps civil aircraft away from missile testing areas.

The segregated area is legally enforced and respected by the islands’ fishing communities. However, if the restriction zone is doubled, coming alongside the high job losses, the Western Isles Fishermen’s Association is threatening direct action that could yet see the Royal Navy becoming involved in enforcing the testing zone.