Coillte has confirmed that it is not working on any more partnerships with investment funds like the one it has entered into with a British firm.

The semi-State forestry body agreed a €200m deal with Gresham House, which raised fears that the price of land will become too high for many farmers to purchase.

The story provoked a strong political backlash and has led to the Government backtracking on the type of deal being used by Coillte.

The Taoiseach and other senior figures such as the Tánaiste and the leader of the Green Party have said the Gresham House deal was not the "preferred model".

Fianna Fáil TD Joe Flaherty told the agriculture committee this week that potential suitors are being scared off from investing due to the backlash.

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He said: "As I understand it, a number of pension and investment funds have told the Irish Strategic Forestry Fund that they don't intend to now proceed."

One source added: "Some of these potential investors would rather invest in nuclear weapons than invest in this fund, such is the backlash."

A spokesman for Gresham House said: "We are seeing very strong interest in this fund, both from investors looking to invest in it and from farmers and other landowners seeking to sell land to it at market prices."

Speaking in a Dáil debate yesterday, Fine Gael TD and chair of the parliamentary party, Richard Bruton, said there was a need for private capital to meet the afforestation targets.

He said: "The reaction to this deal has been hysterical. Forestry needs investment. The State can't do this alone. We need to mobilise private investment to achieve that and it won't all come from farmers."

He also said that much of the debate was "jingoistic", a view that the BusinessPlus.ie understands is shared by some in Government.

The Irish Farmers' Association (IFA) yesterday met with Coillte chief executive Imelda Hurley and managing director Mark Carlin to discuss the controversy.

IFA farm forestry chair Jason Fleming said there was a "robust discussion", adding: "Coillte were left in no doubt that farmers were vehemently opposed to a State-owned forestry company facilitating the purchase of private lands for investors and funds. Coillte did confirm that they were not working on any further projects with private funds."

He said the IFA received assurances that Coillte is not in negotiations with any other funds at present and that the Irish Strategic Forestry Fund planned to plant 3,000 to 3,500 hectares of forestry over the next five years.

A spokesman for Coillte said: "There are no other funds being looked at the moment."

This confirmation that Coillte is not in any further discussions to establish more funds came as a two-hour debate took place in the Dáil yesterday on the subject, with a protest outside the front gates of the Oireachtas.

Green Party TD Neasa Hourigan said: "I would also like the minister to consider that you unpick the Gresham deal."

Fine Gael TD Bernard Durkan also criticised the deal, saying: "I don't accept the arguments put forward in its favour. I think it is the thin edge of the wedge."

However, Green TD Brian Leddin defended the Government's approach, stating that there was a lot of "nonsense" and "cynicism" in the Dáil over the deal and forestry policy in general. "The environmental movement dreamed for years of leveraging private capital," he said.