Graham’s The Family Dairy, in partnership with Mactaggart & Mickel Homes, first submitted the planning application for the development which encompasses 600 houses including 150 affordable units, a new primary school and public park in 2014.

The company said it is “extremely disappointed” by the decision to reject the proposals which it claims would have delivered significant socio-economic benefits for the local area, the Scottish food and drink industry, and Scotland as a whole.

Following a two-year appeal process, minister for local government and housing Kevin Stewart decided that the proposed development did not accord with the new Local Development Plan; a position described by the firm as “contradictory” given that the new plan contains a housing shortfall, is likely to depend on sites such as Airthrey for development in the near future and its adoption has been withheld by the Scottish Government.

The dairy company said its concern over this decision is heightened by the conclusion reached by the Government’s appointed Reporter that the project would deliver a sustainable development and improve local infrastructure, particularly the risk of flooding and road safety.

Had the development been approved, in alignment with Stirling Council’s head of planning’s recommendation to the committee, 150 new affordable homes would have been delivered along with infrastructure improvements and 500 new full-time, on-site jobs at the dairy for the local economy. Overall, this would have generated a £65.3m gross value added (GVA) per annum into the Scottish economy and created a total of 1,425 jobs across the country, the firm added.

Robert Graham, managing director at Graham’s The Family Dairy, said: “We are extremely disappointed by the Minister’s decision which appears to place more importance on continuing to protect a failed Local Development Plan process than supporting the delivering of much needed affordable homes, infrastructure and creating full-time jobs within the city and Scottish dairy sector.

“For a government that talks of its commitment to growing the Scottish economy, prioritising the rural and food and drink sectors as well as tackling the housing shortfall in Scotland, this decision by the Planning Minister sends a clearly contradictory message.

“As a family business which has grown from 45 to almost 700 employees over two decades, we are disappointed that our £40m step-change investment that would have benefited the Scottish economy, as well as the whole Scottish dairy farming industry, will now not go ahead. However, we will continue to endeavour to innovate and deliver great Scottish dairy products for the benefit of our customers, employees and farming partners despite the government’s decision.”

Mactaggart & Mickel Group director, Andrew Mickel, added: “This is a huge disappointment and a surprising decision by the Scottish Government which has publicly stated that economic prosperity is at the heart of its vision for Scotland.

“It’s also terrible news for the thousands of people who are currently on a waiting list for a house in Stirlingshire, and a bitter blow for families looking forward to a new primary school, neighbourhood centre and public park.

“The government says all the right things about tackling the housing crisis, but this decision suggests they are unwilling to actually take the steps required to bring about real improvements.”