The developer's most recent title was the PlayStation VR release Rigs. Prior to that it had worked on Killzone, LittleBigPlanet and MediEvil games.

The studio has been in existence for 19 years. A spokeswoman for Sony said about 50 people were currently employed there.

She added that all staff were at risk of being made unemployed.

"It is regrettable that this decision will lead to compulsory redundancies," Sony said in a statement.

"Whilst we accept that this decision will mean that we risk losing high calibre staff, by focusing on other studios with exciting new projects in development... we believe we will be in a stronger position going forward and able to offer the best possible content of the highest quality to our players.

"This decision should not take anything away from the incredible games and services that Guerrilla Cambridge has delivered."

The move follows the closure of Sony's Cheshire-based Evolution Studio - best known for its Driveclub game - last March, and Studio Liverpool - which made the Wipeout series - in 2012.

However, Sony did open a development base in Manchester in 2015, and continues to operate studios in London and Guildford.

"It is a shock, because the Cambridge studio had been in existence for so long," said Piers Harding-Rolls, a video games industry analyst at IHS Technology.

"But the games sector as a whole is growing, and it's not unusual for the big companies to realign their resources."

Microsoft also closed a long-established British studio - Lionhead, the developer of the Fable series - in 2016.

But the games industry trade association Tiga said that a tax relief scheme, which came into effect in 2014, had helped create jobs elsewhere.

"It's very sad to hear what is happening to Sony Guerrilla Cambridge, but the actual size of the UK games industry is almost at an all time high and we are in a very strong position," said Richard Wilson, the body's chief executive.

'Fast and fluid'

Guerrilla Cambridge's last game - Rigs: Mechanized Combat League - was launched three months ago as a launch title for the PlayStation's virtual reality headset.

It was generally well reviewed.

The Gaming Age described it as "the very best VR experience that this system has to offer".

Sixth Axis said: "So long as you're not affected too heavily by motion sickness... you'll find a fast and fluid multiplayer shooter that gets the best out of PSVR."

However, the title was not a bestseller.

"Guerrilla Cambridge's games have been for the [handheld] PlayStation Vita and most recently PlayStation VR, which have low install bases," said Chris Dring, from the GamesIndustry.biz news site

"So, even though its games have been critically well received, commercially they have struggled.

"That may not have been that important to Sony - obviously it wants to make money from its titles, but platform-holders also use their own games to help sell the hardware in the first place and to help show the way for other studios.

"The move suggests that there's a broader strategy at play, where perhaps Sony is slowing down slightly on its internal VR development to give more opportunity to third-party studios."

Sony said that its Guerrilla Games studio in Amsterdam would not be affected by the cuts.