The UK Government is expected to press ahead with plans to sideline Nicola Sturgeon’s administration by inviting bids for a single freeport north of the Border.
Officials had been discussing a deal which would have seen two ports in Scotland receive the special status, with the scheme a key part of Boris Johnson’s post-Brexit trade drive.
Freeports will receive significant tax breaks and exemptions from some customs rules, and advocates claim that would create thousands of jobs and boost local economies.
However, the SNP ministers demanded that the hubs were rebranded “greenports” north of the Border.
They also said operators must agree to meet certain environmental and employment standards.
Nationalists also claimed the internationally-renowned freeports brand was “tarnished” by links to smuggling and tax evasion.
The UK Government saw the proposed changes as cosmetic and as part of an SNP attempt to claim credit for the scheme.
Eight sites have already been chosen for England and the collapse of negotiations could put a single Scottish freeport at a disadvantage.
Most of the tax breaks on offer are controlled by the Treasury but some, such as a reduction in Scotland’s equivalent to stamp duty, would need to be agreed by the SNP.
SNP Trade Minister Ivan McKee yesterday blamed the UK Government for the collapse.
He also claimed the Scottish Government would now “take forward plans to further develop our greenport model”.
A UK Government source said: “We remain 100 percent committed to freeports which have the potential to boost the Scottish economy and create highly paid jobs.
“We are deeply disappointed that the Scottish Government have chosen not to work with us on the scheme.
“A Scottish freeport will be a huge success but this is a missed opportunity. It is for the Scottish Government to explain why they have chosen not to work with us.”
Dundee, Port of Cromarty Firth and Aberdeen are among the Scottish ports that are desperate to obtain the special status.
UK ministers expect Scottish ports to embrace the opportunity to apply to become the country’s only freeport.
In a letter to Mr McKee earlier this month, Scottish Secretary Alister Jack insisted a deal between the governments was close with £120m in tax reliefs on offer over five years.
He confirmed two freeports would have been set up in Scotland under the deal, with the Scottish Government to have had a joint role in deciding winning bids, with “fair work practices” among the factors to be considered.
But he made clear that he would not give into Mr McKee’s demand to change their name to “greenports” or insist on payment of the real living wage.
He also said the SNP must make “a comparable tax offer in devolved policy areas as is in place for the English freeports.”
Mr McKee said he was unwilling to compromise on his conditions around “fair work and net zero”.
He added: “It is difficult to comprehend why UK Ministers would seek to dilute a strong commitment to fair work, including payment of the real living wage, when seeking to implement their freeport policy in Scotland.
“The Scottish Government therefore has no option but to take forward plans to further develop our green port model which meet the specific needs of Scotland’s economy.”