The new owner of struggling music group Sanctuary today announced it is to shut down the firm’s UK recorded music division, home to artists such as The Happy Mondays, Morrissey and the Charlatans.

Universal Music, which bought Sanctuary for #44.5 million last month, is closing the label to focus on the group’s more profitable management business, merchandising and catalogue divisions.

Sanctuary’s US label - which counts artists including Dolly Parton and former Beach Boys star Brian Wilson - remains unaffected by the move.

Universal Music said: "In consultation with senior management of the Sanctuary Group, it has been decided that its Sanctuary Records UK division will no longer continue as a stand alone, front-line record label."

It added that it was hoping to minimise redundancies and would be consulting with the label’s artists.

The recorded music industry has been under pressure from falling sales of CDs and the impact of illegal digital downloading. Fellow music label EMI last month reported a 13.4% drop in second quarter revenues at its recorded music division as CD-based sales continued to dive.

Sanctuary racked up losses of #56.7 million in the last financial year, although it had narrowed losses in the six months to the end of March to #4 million from #17.6 million a year earlier.

The group’s UK record label was the main drag on profits, seeing a 35% drop in interim revenues, to #16.4 million.

Sanctuary’s management arm, which handles the careers of stars such as Sir Elton John, James Blunt and Lulu, meanwhile notched up revenues of #10.2 million, up 48% on the first half of 2006.

Universal was also said to be attracted to Sanctuary’s catalogue of old recordings, featuring artists such as Eric Clapton and the Kinks.

In March last year, Sanctuary was saved from collapse by a #110 million rescue deal to help it recover from the disastrous acquisition of Urban Records from Matthew Knowles, the father of R&B diva Beyonce.

The group also last year snubbed a takeover approach from smaller rival and Kaiser Chiefs manager Mama Group.