The Highland Arts Partnership - an umbrella group whose members include The Highland Council, Highlands and Islands Enterprise, the Scottish Arts Council and the Highlands of Scotland Tourist Board - has expressed sadness at the demise of Balnain House Limited, the Inverness company which was set up to promote traditional Highland music.

Representatives of public and charitable organisations which between them have provided more than £500,000 since 1991, said that all those who had supported Balnain had been working hard to try to find a solution to its financial crisis. In the end, however, the scale of the problem made it impossible for the company to continue.

Bill Sylvester, chief executive of Inverness and Nairn Enterprise, summed up the views of all the funding partners.

"This is a very sad day which, in the eyes of the public sector partners, is all the sadder because the situation was avoidable," said Mr Sylvester.

"It is a tragedy not just for those employed at Balnain but for local creditors who cannot afford the damage. A combination of unfortunate decisions and problems with financial management were the cause of what went wrong.

"Nobody wanted this day to arrive and we diligently explored every possible avenue to save the company. Funding from the partners stands at more than £500,000. The council, the enterprise network, the Scottish Arts Council and the National Trust for Scotland have bailed the company out a number of times and unfortunately feel that the current situation is irreparable."

All partners agreed that traditional music was too important a part of the cultural life of the community to be left in a state of uncertainty year after year.

The partners will now work to ensure that promotion and educational work with traditional and Gaelic arts and music in Inverness and the Highlands can continue through the joint development of a long-term plan to ensure a sustainable future.

There was immediate good news in the form of a pledge that funding would continue to be available to provide tuition in the city.