Energy efficiency firm Entu is to close its UK solar division less than a week after the government revealed plans to cut the feed-in tariff by almost 90%, citing the “increasingly difficult” environment for solar in the UK.

The company made the announcement in a trading update today where it also revealed it expected to make a £2 million loss from its solar division having previously forecast a profit of £1.6 million, leading Entu to issue a warning over profit for the year ending 31 October.

“The prospects for our solar business have deteriorated dramatically over the last six months, and we have taken a decision which I have no doubt will be seen to be correct,” Ian Blackhurst, chief executive at Entu, said.

Entu had previously that its solar business had faced a difficult start to the financial year and today said that the expected improvement in activity had not materialised.

“Furthermore, the board expects the market environment for solar to become increasingly difficult as a result of speculation about a possible increase in VAT for its solar products from 5% to 20% and uncertainties concerning the future level of feed-in tariffs, in particular a recent government proposal for a substantial reduction in feed-in tariffs with effect from January 2016,” the statement read.

The company now expects operating profit for the year to stand at around £8 million – down 22.3% on the £10.3 million it recorded last year – and Entu has also warned that it is to reconsider its final dividend for the year, noting that it stands to be less than the expected 5.33 pence but not lower than 2.67 pence.

Last week the Department for Energy and Climate Change announced proposals to cut the small-scale feed-in tariff by as much as 87% as part of cost-cutting measures relating to the Levy Control Framework, plans which have prompted outcry from the UK’s solar sector.