SCOTLAND'S theatre world will be "damaged fundamentally" by the controversial funding changes of Creative Scotland, a leading director claimed last night.

Matthew Lenton, artistic director of Vanishing Point, an award-winning, international touring theatre company, said it may have to move abroad if it is not able to continue to work under the national arts body's new funding scheme. He said: "If nothing changes, then I am deeply con-cerned whether Vanishing Point will be able to work in Scotland, when there are opportunities in other countries."

Mr Lenton, whose group's Wonderland is a major show at this year's Edinburgh International Festival, added: "We need to try and make Creative Scotland see that unless something changes dramatically then there is a danger the theatre world in Scotland will be damaged fundamentally."

His comments were last night backed by Vicky Featherstone, the artistic director of the National Theatre of Scotland (NTS), who spoke for the first time about the funding controversy which has left Scotland's theatre companies feeling, she said, "fragile and vulnerable".

She cast doubt on project funding as a means of supporting any art form in the long term.

Ms Featherstone, who is directing Appointment with The Wicker Man at the Assembly Rooms at the Fringe and whose NTS has worked with Vanishing Point in the past, said: "You can-not create a strong artistic sector project by project, and that has been proved. The development of the art form is all about the long term and it's all about trust."

Mr Lenton said the replacement of annual funding, known as Flexible Funding, by project funding using National Lottery funds, will leave Vanishing Point's work – which often involves long development, periods of artistic creation, and complex partnerships with national and inter-national arts companies – "pro- foundly threatened".

He met with Creative Scotland's director of creative development, Venu Dhupa, last week to express his concerns about the use of project funding and how his company could, in practice, apply for it. However, he was left unconvinced and deeply concerned by the funding body's policies, which, he says, do not take note of different companies working in different ways.

The act of applying for funding a project or projects involves parameters that simply do not apply to many artistic ways of working, Mr Lenton added.

He said if there is no change in the funding regime, Vanishing Point, established in 1999 and based at the Centre for Contemporary Arts in Glasgow, may have to stop working in Scotland. He also said he is deeply uncomfortable about Creative Scotland picking which artistic projects to back under the new system, which seems to put more commissioning power in the hands of Creative Scotland than in the artistic directors of companies.

Mr Lenton said he would like the body to discuss with the National Lottery whether lottery rules can be changed, so that its money can be used as revenue funding. Creative Scotland announced in May that 49 leading companies aided by Flexible Funding would have that type of cash stream removed and would instead have to apply for Lottery funding, which cannot by law be used as revenue funding.

A spokeswoman said: "Our recently-published Review of Theatre has highlighted a num-ber of suggestions and we have invited the sector to respond to these ideas at two open discussion sessions on September 3 and 4. Creative Scotland does offer opportunities to develop collaborative projects with international co-producers through our other programmes, details of which are published on our website."