Monumental Games is to close its Manchester studio - a move that will result in a number of staff redundancies.
The reason for the studio's closure has yet to be confirmed by the company, as is the number of employees that will be affected.
Speaking to North West media industry site How Do, chief operating officer Paul Mayze said:
"Ultimately, it will lead to efficiency gains for the company as a whole, but it has, unfortunately, led to some redundancies. It is not a decision that we have taken lightly."
Mayze was unable to confirm how many jobs would be lost, saying that a final decision regarding the office was only made last Tuesday, and that discussions were ongoing.
Monumental had apparently been faring well despite tough economic conditions - the developer was awarded funding of £2 million in January of this year and had completed work on owned IP Hunter's World as well as Capcom's next Moto GP title.
It had also announced plans to release its first Facebook title later this year.
The Salford Quays studio was thought to be working on conversions and emerging technologies, including Natal and PlayStation Move games.
It was formed from Activision's Swordfish Studio Manchester, which Monumental acquired at the end of 2008. At that time, the studio's headcount was 26.
UPDATE: Monumental has confirmed the closure in a statement, saying the move was necessary in order to allow the company to focus on its most profitable business areas.
"Following its recent restructure, Monumental Games has taken the decision to close its offices in Manchester," reads the statement. "The move is expected to result in significant efficiency gains for the business as a whole and is the product of a desire to better focus resources on Monumentalís most profitable business areas.
"Unfortunately, this has led to some redundancies being made, and consequently this has been a difficult business decision that has not been taken lightly. However, this action does not fundamentally affect any of Monumentalís ongoing business or its three studio structure (Racing, Online, and Emerging Technologies).
"The move will help to support Monumental Gamesí growth plans as it looks to extend its offering to include browser and console-based massively multiplayer online (MMO) offerings and continue to build on the popularity of its current games portfolio including MotoGP, Football Superstars and Hunterís World."
Mayze also clarified to GamesIndustry.biz that a £140,000 grant awarded to Monumental in 2009 by the NorthWest Regional Development Agency to secure the future of the Salford Quays business had been dependant on Monumental growing the studio's headcount by 22 - something it had been unable to achieve within the resulting economic recession.