The closure of Edinburgh's BlindCraft factory has moved a step closer with a city council report recommending it be shut down.
The 57 staff, who are mostly disabled, are employed by the council-funded charity to make beds and mattresses.
But council officials have reported the only way to achieve savings of £700,000 per year is to stop production.
They are recommending half the money saved is ploughed back into supporting disabled people into employment.
A decision is likely to be taken about the future of the factory when the council - which is losing about £1m a year on the venture - meets next Thursday.
BlindCraft has been operating in Edinburgh since 1793.
The latest report by council officers said: "Since 2003, the council has funded a level of deficit which cumulatively has totalled around £12m.
"Over recent years, stringent cost controls have been put in place and the level of subsidy required has stabilised at £1m per annum.
"This level of subsidy is unaffordable given the pressures facing the council and the council requires a budget saving of £700,000 for 2011/12."
The report had looked at a number of savings options including reducing the factory's weekly operation, but it said curtailing opening hours would only be a short term fix.
The report concluded: "During the period of statutory consultation, during which the engagement of staff-side representatives was exemplary, the only option remaining that delivers the £700,000 required savings is the closure of BlindCraft."
Officials recommend that £365,000 be ploughed into schemes enabling disabled people to be employed.