Staff at a computer games company which received £1 million to expand are facing redundancy.

NCSoft Europe, which employs 112 people at its headquarters in Trafalgar Place, Brighton, was awarded the grant by Seeda, the regional development agency, in May last year.

The money was going to support the firm’s move to the CityPoint development, near Brighton Station, by 2009 and the creation of another 116 jobs.

But these plans have been shelved following the poor sales performance of one of the firm’s “massively multiplayer online games” (MMOs).

As a result, the company’s Korean parent group NCSoft Corporation is consolidating its European and America subsidiaries under the label NCSoft West, which will be based in Seattle.

A spokeswoman for NCSoft Europe said 58 positions, all in Brighton, had been identified as “potentially redundant”.

According to Seeda, the company received the money under the Government SFIE (Selective Finance for Investment in England) grant scheme and only part had been spent.

A spokeswoman said: “Seeda promotes the Government SFIE business grant scheme to create the conditions for long-term sustainable economic growth and increased economic prosperity.

“The grant was awarded to NCSoft Europe in May 2007 to secure jobs and investment in Brighton and retain the business in the region. To date, NCSoft has received £141,000 as the first payment of the £950,000 grant.”

Seeda could not comment on whether it would pursue NCSoft for the rest of the money because the redundancies had not been confirmed.

A spokeswoman said: “Seeda is not able to pre-judge any possible changes of NCSoft Europe and will assess the future of the grant once the business has made a decision. As with all SFIE grants, Seeda regularly monitors the progress of the project.”

No one from NCSoft Europe would comment on the Seeda grant.

News of job losses at the company came as shock to the games industry in Brighton, which has been in rude health recently with a number of new firms setting up in the city.

Phil Jones, managing director of Wired Sussex, the support organisation for digital media companies, believes the strength of the industry should mean there was other work for those affected.

He said: “It seems this is the consequence of one of their games not selling as well as expected, not the credit crunch or anything like that.

“It is a shame but it is not going to stop the computer games industry in Brighton from growing. The industry is established enough in the city that it does not depend on one big company like NCSoft.

“It is also a massive shame for the individuals who work there. However, there is not a games company in Brighton not currently recruiting so it’s extremely hopeful many of the employees will not have to leave the city to find alternative employment.”