Scotland’s planned deposit return scheme (DRS) for drinks cans and bottles “cannot go ahead as currently planned”, the minister in charge of it has admitted.

Lorna Slater said the scheme – which was to have been the first of its kind in the UK – had been “shot down by Westminster”.

First Minister Humza Yousaf has already warned the UK Government’s insistence that glass should not be included in the Scottish scheme puts the future of the environmental initiative in “grave danger”.

He had set a deadline of Monday for the UK Government to change its mind over the key issue.

When that did not happen, Ms Slater, the circular economy minister in the Scottish Government, told MSPs: “It is clear that Scotland’s deposit return scheme, in the scope and form passed by this Parliament, cannot go ahead as currently planned.”

The minister said she, together with Circularity Scotland – the company set up to run DRS north of the border – were “looking at how we can take an alternative scheme forward in Scotland, because the one that this Parliament passed has been shot down by Westminster”.

Ms Slater added she was seeking urgent talks with politicians at Westminster – but said the intervention from the UK Government had also created “significant uncertainty” around other parts of the scheme as passed by Holyrood.

This includes whether the deposit to be levied on drinks cans and bottles – which would be returned to shoppers when the empty containers are brought back for recycling – would be set at 20p.

Pressed on the future of DRS at Holyrood, Ms Slater said: “Right now, we are urgently establishing to what extent there is a way forward for a modified scheme, its scope, terms and timescales.

“That crucially depends on whether the UK Government can provide timely, stable and reliable assurances on basic operational matters, such as trading standards, the 20p deposit and producer fees.

“It also depends on to what extent there is industry support for an alternative scheme.”

Asked by Tory MSP Graham Simpson if a “modified” DRS, without glass bottles in it, could be up and running by the current launch date of March 2024, Ms Slater told him removing these from the remit of the scheme was a “substantial change”.

She added: “To decide whether we can go ahead with an alternative scheme without glass is a very substantial decision.”

She said she and Mr Yousaf would be meeting with industry representatives on Wednesday to discuss this as part of efforts to “decide whether it is feasible for us to go forward”.

Circularity Scotland has already made clear it can “absolutely” go ahead with the scheme without glass bottles being included.

Small business leaders, meanwhile, claimed that while DRS was “well intentioned”, the scheme was “fundamentally flawed”.

Speaking about the initiative, Andrew McRae, Scotland policy chair of the Federation of Small Businesses, said: “As time went on, it became apparent it wasn’t going to work in its current form and was going to damage small producers and retailers on its way down.

“We now need to get on with developing a system that stands a better chance of working – one that makes it as easy as possible for consumers, producers and retailers.

“Key to that will be learning the lessons from this episode and bringing the sort of small businesses, on whom government will be relying to deliver any such scheme, in on the ground floor.”

While the Scottish Government was seeking to bring in its DRS in March next year, similar initiatives for the rest of the UK are not planned until 2025 at the earliest.