Granada Film, the UK operation behind Ghost World, Bloody Sunday, The Gathering and Mira Nair's upcoming Vanity Fair adaptation, is being axed.

The move means that none of the major ITV commercial broadcasters in the UK have a permanent film operation, despite announcements that the service would spend $155m (£100m) on UK production. The closure comes hard on the heels of Channel 4's scaling back of FilmFour.

While the closure means the end of another source of development cash in the UK, some existing projects may be saved. Granada's Pippa Cross and Jeanette Day are to set up their own production company and expect to work with Granada on upcoming productions such as Vanity Fair, which is set up with Focus Features (formerly Good Machine), and All American Man. Sales chief Penny Wolf may join the new company.

Granada is citing the advertising downturn as the reason behind the move. Although run on a tight budget - the operation employed 10 people - Granada Film is understood to have lost a small amount of money. Granada is understood to want to focus on core businesses.

Ironically, the film operation has recently enjoyed a run of success, earning critical kudos with Bloody Sunday, House Of Mirth and Ghost World. The operation has high hopes for Miramax Films' upcoming release of The Gathering, a horror starring Christina Ricci and Granada's biggest budget film to date.