Scotland’s controversial deposit return scheme (DRS) could be withdrawn if a UK government internal market exemption is not received, according to Circular Economy minister Lorna Slater.

The scheme, which intends to encourage consumers to recycle drinks bottles and cans in exchange for a 20p deposit paid on purchase has already been delayed from August to March next year.

But it needs the UK government to grant it exemption under the Internal Market Act, a piece of legislation introduced after Brexit to ensure a level playing for trade within the UK.

Ms Slater, who has been championing the DRS told the Scottish Grocers’ Federation conference yesterday that Westminster had been given a deadline of the end of this month to make a decision.

She said that if there is no response the scheme may have to be axed.

“If we haven’t heard from [the UK government] by the end of May, because of the concerns around the viability of the scheme going forward, we will have to make a proactive decision at that point as to whether the scene is viable or not to move forward,” she said.

“I can’t say exactly how that’s going to fall out. We’re still working very closely with the UK government to make that happen.”

Pressure has mounted on the government from businesses saying the scheme is unworkable and too costly for some to operate.

But axing the project would prompt a huge backlash from companies which have already invested millions into infrastructure, including collection points.

David Harris, chief executive of scheme administrator Circularity Scotland, said it is a not-for-profit business that is reliant on fees from producers.

He warned there was “growing urgency” to find a solution to the current impasse, with millions of pounds and hundreds of jobs at risk.

However, UK government sources have said it is unrealistic to expect a decision on exemption by the end of May. Alister Jack, the Scottish secretary, has previously said that the bar for exemption is very high.

Critics, including some big businesses, have said that the Scottish Government should not have launched its own scheme which creates its own problems for drinks producers serving the UK market.

Tesco called for better collaboration between the UK and devolved governments, arguing that “having multiple different approaches to DRSs within the UK jeopardises the sustainability and viability of schemes, and a joined-up approach across the UK must be adopted”.

Maurice Golden, the Scottish Conservative MSP, said: “Lorna Slater should still be trying to pass the buck to Westminster.

“When major retailers are calling for a UK-wide approach and smaller ones are still waiting for information about how it will work, and whether they will be compensated for the huge costs she has landed them with, she’s effectively trying to blackmail the UK government into bailing her out.”