By Rob Edwards, Environment Editor

A pioneering Scottish woodwork project famed for its environmentally-friendly furniture has been broken up, prompting bitter recriminations, redundancies and regrets.

Borders Woodschool, at Ancrum, near Jedburgh, has been restructured and its co-founder and manager, Eoin Cox, sacked, along with six other staff. The associated retail gallery, BuyDesign, at the nearby Harestanes visitor centre, has also been shut down.

Woodschool was started in 1996 by Cox and artist, Tim Stead, who died of cancer in 2000. Stead helped make the Millennium Clock Tower which stands in the Museum of Scotland in Edinburgh, a chair for the Pope's visit to Scotland in 1981 and furniture for Glasgow's Cafe Gandolfi and elsewhere.

Woodschool has won worldwide acclaim as a model of sustainable development. It has been warmly praised - and funded - by the Scottish government and environmental groups.

Its aim was to create attractive furniture out of Scottish hardwoods, instead of burning or exporting the timber. It also helped develop the Scottish Furniture Makers Association.

Woodschool's owner, Borders Forest Trust, says the changes are vital to ensure the project's financial survival. However, Cox said: "I am so disappointed that an environmental charity like Borders Forest Trust that is supposed to be rooted in the community is being run by people that are only concerned about the bottom line.

"A corporate mentality has destroyed the creative culture that Tim Stead, myself and many others had thought possible all those years ago. It is heartbreaking."

The closure of BuyDesign and the break-up of Woodschool were a "death knell for applied craftsmanship" in Scotland, Cox alleged.

He also insisted that the BuyDesign gallery was profitable, and has tried unsuccessfully to buy out the business. It attracted 15,000 visitors a year and had generated £1.8 million worth of income since 2001, he said.

But John Hunt, the chairman of Borders Forest Trust, which has run Woodschool as its trading subsidiary, said the gallery lost £15,000 last year and had debts in excess of £50,000.

"We had no choice but to take action to stop losing money, otherwise the business would have gone into liquidation," he argued. "It's been a very difficult and painful process."

Cox had to take some responsibility for the financial problems, Hunt contended, adding: "It's obviously painful for him." Hunt also dismissed as "complete nonsense" the accusation that Woodschool's original aims were being abandoned.

Hunt pointed out that a new co-operative, called Real Wood Studios, was being formed by six Woodschool employees, which would run the business in the future. This would uphold the ethos of increasing indigenous use of Scottish hardwoods, he said.

"Changes involving redundancies are never going to be easy, but we needed new ideas and new investment. It's sad, but some change was inevitable."

Jan Bebbington, a professor of accounting and sustainable development at the University of St Andrews, said: "I am very sad to see an exemplar of sustainable development being scaled back Business models that put ownership of resources into community hands and which sustain local economies are much needed, especially in the current economic climate."