The Orkney Islands Council-owned abattoir closed yesterday with immediate effect.
Since 2012, the abattoir had been leased and operated on a reduced basis by a consortium of local butchers known as Orkney Meat Processors Ltd (OMPL).
The council has said the abattoir was too large for forecasted throughput and significant re-investment was required.
OMPL butchers are expected to make arrangements to ship livestock south for slaughter before products are returned to Orkney to meet local demand.
Gavin Barr, the council’s director of development and infrastructure services, said: “We’ve worked hard with OMPL and spent a great deal of money over the last five years to keep the facility running, but this cannot continue in the long-term, with substantial further investment needed to bring the facility up to the standard that we feel is necessary to continue to provide this service.
“We are confident in the alternative arrangements that local butchers have put in place and there should be no knock effect to meat supplies in Orkney.”
In December, the council launched an Abattoir Challenge Fund aimed at encouraging the private sector to become directly involved in developing a solution to the challenge of providing sustainable abattoir services in Orkney.
The fund remains open for applicants.
Orkney MSP Liam McArhur said: “This news will be met with genuine shock across Orkney. It has extremely serious implications for farming in the islands, as well as for the wider food and drink sector. These are absolute lynchpins of the Orkney economy.
“I am particularly concerned at the impact this could have on the protected designation status of Orkney beef and lamb, as well as the consequences for other local livestock producers.
“Likewise, there seem to be serious questions about how we deal with animal welfare issues going forward in the absence of an emergency slaughter facility.”