End of the line for Scotland's 'Turner'

• Artist Patricia Cain in the studio of her Glasgow flat. She says the Aspect Prize gave her an international reputation; she went on to win the Threadneedle Prize. Photograph: Robert Perry

The Aspect Prize, which awards 30,000 annually to Scottish painters, will end in January when the winner of the 2010-2011 competition is announced.

Now leading experts have warned that the loss could hit Scotland's internationally recognised ability to produce top-class painters.

The crisis comes after organisers failed to replace the current supporters of the scheme, Aspect Capital Limited, a London-based hedge fund manager, whose eight-year deal has run out.

Since the Aspect Prize - known as the Scottish "Turner Prize" - was founded in 2003, it has awarded more than 200,000 to Scottish artists, and generated at least a further 200,000 in sales.

The Aspect Prize, which attracts about 180 applicants annually, is one of the richest art prizes in the UK, running a close second to the JoLoMo Foundation, which offers a total fund of 35,000 over a number of awards. The Turner Prize, by comparison, is worth 40,000.

To enter the Aspect Prize artists must be Scottish or permanently based in Scotland and must not have had an exhibition in London in the previous six years. Four finalists, selected from an Aspect exhibition held at the Paisley Art Gallery and Museum, are awarded 5,000, with the eventual winner receiving an extra 10,000. The work of the finalists also forms the basis of a major exhibition at The Fleming Collection in London - the only UK museum devoted entirely to Scottish art - and a painting by the winner is chosen for the institution's permanent holdings.

Professor Rodger Wilson, head of the School of Fine Art at the Glasgow School of Art, said: "Any withdrawal of support has to be lamented. The encouragement of our emerging talent is important to maintaining Scotland's artistic heritage. Artists live hand to mouth and any source of reasonable money is to be cherished."

Wilson urged businesses to dig deep to save the prize. "It wouldn't be beyond the reach of corporate investors who write off far greater amounts for trivial things to donate some money." he added. "If we let these things go we will never get them back."

Among those who have won the prize are Liz Knox, whose work has been displayed widely throughout Britain since triumphing in 2003; Kim Scouller, whose work is owned by the Prince of Wales; and Patricia Cain, who went on to claim the 25,000 Threadneedle Prize for painting and sculpture shortly after being awarded the Aspect Prize this year for her depictions of Glasgow's Riverside Museum, which is still being built.

This year's shortlist includes Steven Lindsay, the former lead singer of Glasgow band The Big Dish, and Adam Kennedy, the brother of one of last year's finalists.

Charles Jamieson, co-founder of the Aspect Prize, and a working artist, said the awards had become a "big beast" which was costly to run, with the expense of organising two exhibitions each year exceeding the prize fund.

"We always knew there was a timeline with Aspect," he said. "The problem is it was a single sponsorship, and we didn't have lots of companies involved, which is probably our fault. We approached a few people but in the current economic climate it just didn't happen."

Patricia Cain, this year's winner, said she was deeply saddened by the loss of the prize. "There are relatively limited options for artists creating paintings and drawings compared with those creating conceptual work." she said. Cain, who gave up a successful legal career to become a full-time artist, said that winning had given her profile an enormous boost.

"I went from being relatively unrecognised - someone who just showed in Glasgow - to having an international presence, and I don't think I could have achieved that without the prize. It also allowed me to focus on developing my work without the pressure to sell it, which is very, very valuable."

Jamieson said that despite the setback, he intended to replace the prize with a new "lighter model", although it is unlikely to be in place for at least another year.

"The important thing is that there is a prize for Scottish painters. In a world obsessed by contemporary art, painting gets sidelined," he said.