The publisher has decided to close down the Birmingham studio; it released SEGA Rally for Xbox360, PS3 and PC last year to good reception. Unfortunately it didn't make too big a splash.
SEGA Racing Studios employed 60 people and had a numbered of unannounced projects being worked over.
“The decision is part of a review of SEGA's Western Development Studios to ensure that each studio is a profitable entity in its own right, and unfortunately the SEGA Racing Studio’s five year plan would not result in a successful return for the SEGA business moving forward," said a company spokesperson.
“SEGA would like to stress that there will be no changes within their other internal development studios.”
Recently there have been a string of closures and downsizing of gaming companies, bad news for the more independent developers out there.