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Pioneering Dundee-based computer games company Realtime Worlds has gone into administration putting hundreds of jobs at risk.

The company, founded by the creator of Lemmings and Grand Theft Auto, is based at a former jute mill in the city.

It employs about 250 people and was seen as one of the biggest players in the UK computer games market.

Its newest title, online role-playing game APB, launched a few weeks ago but has experienced "lacklustre" demand.

Joint administrators have been appointed and a consultation process on the future of the firm is under way.

The announcement came in the wake of the UK government's decision to cancel a tax break for the gaming industry, as part of its budget focus on tax increases and spending cuts.

APB was five years in development but is thought to have failed to attract sufficient numbers of subscribers following mediocre reviews.

Realtime Worlds made 60 staff redundant last week.

Paul Dounis, of administrators Begbies Traynor, said: "We are currently involved in a consultative process with the 200 staff employed in Dundee."

Realtime has its main development operations in Dundee and its parent company head office and online operations are in Colorado.

The administrators will employ some of the 42 staff in the US to assist in selling the business.

Mr Dounis added: "Our intention is to continue trading the company while we attempt to find a going concern buyer which will safeguard the future of the business."

He said it was hoped that any future buyer would continue to develop APB.

Realtime Worlds was founded in 2002 by creative director Dave Jones and in 2007 the company won two Baftas for its games.

Professor Bernard King, principal of Abertay University, said the collapse was sad news.

He added: "As the jewel in the crown of Dundee's computer games development sector, Realtime Worlds epitomises the creativity and determination of the entire Scottish industry.

"It is unfortunate that market conditions have dictated this drastic step."

Prof King said that Abertay was ready to deploy all its resources, including the new games industry business support mechanism launched by the UK government last month, to support whatever new business structures might emerge from the administration process.

A spokesman for the Scotland Office said: "It is a great shame to hear that Realtime Worlds has gone into administration today and we hope a buyer can be found for the company."

Jim Murphy, shadow secretary of state for Scotland, said: "This underlies the need to support the computer games industry better. I cannot understand why the government has scrapped the tax relief scheme Labour announced in March.

"We need Dundee and the whole of Scotland to be a world leader in computer games."