A UK drama school has closed after an unsuccessful restructuring left it with heavy losses and no longer financially viable, forcing nearly 300 students to change schools without warning.

Students at the Academy of Live and Recorded Arts (ALRA) said they were stunned and felt “physically ill” after learning on Monday that the institution, which opened in 1979 and whose alumni include Bridget Christie and Miranda Hart, was closing. The 284 students are offered places at another acting school, Rose Bruford College, to continue their education.

ALRA said it underwent restructuring in 2021, but after an unsuccessful search for “new sources of revenue” it was closing with immediate effect. He said his board had been looking for a new owner but “it wasn’t possible”.

He said: “The ALRA board looked for other options and eventually decided to stop teaching students and working with partners. [the school is] provide appropriate support for students to find alternative study options.

The institution, which has campuses in central London and Wigan and charges £13,000 a year for some courses, said its 28 permanent staff and 16 fixed-term staff would lose their jobs.

ALRA South students now have the choice of continuing their education at Rose Bruford, which has sites in London and has taught in Brighton, Edinburgh and Belfast, or seeking to continue elsewhere, while the Guardian understands that ALRA North students could continue to study at the same campus in Wigan.

The students shared their shock on social media. Oliver Knowles, theater student at ALRA North, wrote on Twitter: “Words cannot describe how I feel. An institution that gradually raised me in the theater industry from the age of 18. I saw my institution collapse and it saddens me.

Nicola Dandridge, chief executive of the Office for Students, said the regulator had worked “intensively with a range of organizations to ensure that ALRA students are protected as much as possible in what is inevitably a situation difficult”.

In 2020, the school was embroiled in a row when 13 graduates released an open letter accusing it of failing to address systemic racism. One student said a teacher told her she was a ‘ghetto girl with a rude girlish attitude’, while others said they were exposed to racist stereotyping and language from the teaching staff at the two ALRA sites.

Principal Adrian Hall resigned after the row and an external review found the school had ‘turned a blind eye’ to racism and had a culture of downplaying or dismissing student complaints.