Activision has confirmed its Liverpool-based studio Bizarre Creations is in the firing line, with seperate sources claiming that the outfit's 200-odd staff could be out of a job within 90 days.
Studio sources told Develop earlier today that the Project Gotham developer has been put on three months' notice.
Activision said it is "exploring our options regarding the future of the studio, including a potential sale of the business."
If the studio closes down, it will mark the second full-scale UK studio to have been torn from its roots this year alone.
Dundee studio Realtime Worlds entered administration in August following poor sales of its final project; APB.
Bizarre Creations appears to have suffered the same fate, if a statement from Activision is to be believed.
The publisher said: "Although we made a substantial investment in creating a new IP, Blur, it did not find a commercial audience."
Bizarre Creations recently hinted that work was underway on a sequel to the racing title.
The news comes days after Activision revealed it had made over £80 million in five UK shopping days after the release of Call Of Duty Black Ops.
Bizarre's most recent game, 007: Blood Stone was released just two weeks ago, to average review scores and modest sales.
The studio also completed its first game for Activision, the racing game Blur, earlier this year.
Activision paid $67.4 million in cash to wholly acquire the Project Gotham Racing developer back in 2007.
The publisher would have had to pay Bizarre an additional $40 million if the studio met its commercial targets by 2012/13.