HEROtsc, established in Rothesay in 1994 as Telecom Service Centres Ltd, was informed by the LoveFilm company that it intended to move its contract to another supplier with "strong multi-lingual capability".

The LoveFilm contract – which was signed in 2007 - is due to end in September, but in order to conform with employment law HEROtsc began formal consultations with the Rothesay employees working on the contract on Friday.

A spokesperson for HEROtsc said: "The company reluctantly has had to open formal consultations with 41 employees regarding the loss of work in their Bute contact centre.

"This is no reflection on the quality provided by HEROtsc employees in the three years they have been working on this particular account – just a desire by the client for a one-site, multi-lingual service to support their European customer base, which we unfortunately could not effectively provide from Bute.

"In the interim, our sales team are working full time to secure other work to replace the client we are losing and will keep staff informed of all developments in that search."

A LoveFilm spokesperson told The Buteman the decision followed a review of all aspects of the company's business.

"We have decided to change to a supplier who can offer us a full multi-lingual service to handle our growing European business," the spokesperson confirmed.

"LoveFilm would like to thank HEROtsc for their hard work over the last three years."

Bute councillor Robert Macintyre, who is also Argyll and Bute's spokesperson for the economy, environment and rural affairs, said the news would be "a savage blow" to the island's economy.

"TSC is the largest private sector employer on Bute, with more than one hundred employees at present," he pointed out.

"To announce that the workforce is going to be slashed by some 40 per cent is brutal news for the island to take, particularly as it comes only weeks after 19 jobs were lost at Rothesay Creamery.

"Should another 41 jobs go at TSC, it would probably represent around £1 million of wages lost to the Rothesay and wider Bute economy.

"I am hopeful that the work going on behind the scenes might lead to new contracts for TSC.

"However, if that does not prove possible, then I and my colleagues will be doing everything we can to try to ensure that this situation is managed as sensitively as possible, and that those who lose their jobs can find employment elsewhere."

Local MSP and enterprise minister Jim Mather said: "This news will be very stressful for the TSC employees and their families, as well as for all those other people who care about the economic wellbeing of Bute.

"I have in the past worked with our enterprise agencies and Scottish Development International to help TSC win business, and this is what we will all strive to do again this time."

A Scottish Government spokesperson added: "High-lands and Islands Enterprise (HIE] staff are in dialogue with TSC management to assist in securing alternative contracts for the Rothesay operation to maximise employment and profitability.

"Skills Development Scotland will lead on a Partnership Action for Continuing Employment (PACE) initiative, tailored to help those members of staff facing unemployment to find alternative positions."