The future of a giant paper mill employing nearly 400 people was today in doubt after bosses said it was not financially viable.

International Paper said it was launching a consultation with employees at its Inverurie mill in Aberdeenshire which will study "all possible scenarios".

The move was greeted with dismay by the local MP, Liberal Democrat Malcolm Bruce, who said it was a "devastating" blow to the local and regional economy.

"We face the prospect of losing almost 400 good jobs with the consequential loss of spending in the local economy," said Mr Bruce, MP for Gordon.

"If the mill closes it will end more than 200 years of history in the town."

He went on: "The timing of this announcement could not have been worse as we approach a recession.

"The consultation period does afford some time to look at the options available and to come up with a possible solution that will best serve the workforce and the local community.

"I will be seeking meetings with management and workforce to discuss the prospects."

Announcing the move today, US-based International Paper said the mill was high-cost, and faced further financial pressures and an oversupplied market for its product in Europe.

Mill director Chris Melia said: "Despite significant investments and our extremely skilled and committed workforce, the mill is unprofitable and is not financially viable.

"Our task now is to review all the possible scenarios for the future of the mill, while staying focused on customer needs.

"We are committed to conducting a meaningful consultation process with the appropriate employee representatives, and will do all we can to ensure the best possible outcome for all concerned."

The mill was bought over by International Paper in 1996 and produces 250,000 tonnes of uncoated paper a year.