There is an angry reaction to reports that the Highlands and Islands may lose their dedicated enterprise agency, half a century after ministers recognised the area’s unique problems needed special attention.

News that Highlands and Islands Enterprise (HIE) is being considered for merger with the Scottish Government's other agency Scottish Enterprise to save money, is being seen as confirmation of long-standing fears.

HIE was established in 1991 as the successor body to the Highlands and Islands Development board. The latter had been created by Harold Wilson’s Labour government tin 1965 largely to address the Highland problem of chronic depopulation. Uniquely it was given a social as well as economic development role, supporting fragile communities from Shetland to Kintyre and the Outer Isles to the Cairngorms.

Doubts over the continuation of HIE’s separate existence are now being raised by Highland economist Tony Mackay.

In Inverness-based Mackay Consultants’ Monthly Economic Report, he wrote that he had spent a day at the Scottish Parliament last week when he met two ministers.

“One of the ministers told me that the Government is considering merging Highlands and Islands Enterprise and Scottish Enterprise (SE).

“There is an ongoing review into the work of the two bodies. The Minister told me that they are giving serious consideration to merging the two bodies, mainly to reduce costs."

The chief executive of HIE had left the organisation recently, and only an "interim" replacement has been appointed, he said.

"HIE have not yet advertised the post and I understand that they have been told not to do that until the government review has been completed.”

Mr Mackay said the Enterprise and Skills Review had invited evidence by August 15, It was currently being assessed by officials.

He concluded a merger of HIE and SE “will not go down well locally and I am sure that there would be a lot of local opposition to that.”

In the current year HIE has a budget of £79.5m and a staff of 300. SE’s budget is over £300m and currently employs 1270 people.

Both HIE and SE said they are participating in the Scottish Government’s current Enterprise and Skills Review, and so it would be inappropriate to comment. However an HIE spokeswoman added “ We have submitted evidence that describes the benefits the region obtains through having a dedicated agency with a remit geared toward its specific needs and opportunities.”

Scottish Green MSP for the Highlands and Islands John Finnie also said “There were, and remain, compelling reasons why the Highlands and Islands requires a dedicated development agency.

“Quite the reverse of seeing the need to centralise this function, the Scottish Greens wish to see the South of Scotland benefit, in the way the Highlands and Islands has, from having its own dedicated development agency.”

He said Greens would vigorously resist any proposal to do away with HIE.

Labour MSP David Stewart said “Obviously it is something that we have feared over many years as we’ve seen the agency shrink in size and lose its campaigning voice for the Highlands and Islands."

With the departure of Chief Executive and an interim appointment made, "there had been rumours that this could be the end for the agency in the region.

“What I find incredible is that a consultant appears to be given insider information while MSPs, who represent this area, are being kept in the dark."

He would seek an urgent meeting with Mr Brown.

In response to Mr Mackay's comments, a Scottish Government spokesman said the focus of the review had been on improving "the outcomes of those who engage with our enterprise and skills agencies, and building on the successes and strong points of these agencies."

The Government's focus was on building an economy where everyone had a fair chance to contribute and share in the benefits of economic growth. "Our planned £500 million Scottish Growth Fund is designed to support business, the workforce and the economy to grow."