Student growth in further education colleges is to be scaled down to 3 per cent next year (1996/97) following a decision announced today by the Further Education Funding Council.

The news will take some of the pressure off colleges as their financial forecasts, also published today, confirm that the financial health of the sector is deteriorating. The funding council said 48 colleges were in a weak financial state and the forecasts of 115 colleges suggested that "significant adverse variances in their assumptions could limit their ability to deliver their strategic plans".

Overall two thirds of the sector were in strong financial health but the funding council said the new forecasts showed that the position of 65 colleges had deteriorated since the July update of forecasts. Those colleges with weak financial positions are required to produce recovery plans to secure their future.

The financial health of the sector as a whole is forecast to improve over the period to 1998 but the funding council points out that the forecasts were based on assumptions of a "significantly higher level of grant" from the council than will be available under the latest Government spending plans.

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Following the severe cuts in capital spending announced in the Public Expenditure Settlement for colleges last month, the funding council has decided to distribute most of the available capital funds through the recurrent funding methodology. This follows a rapid process of consultation with colleges over the past three weeks.

The settlement assumes an overall growth in FTE student numbers of 20 per cent from 1993/94 to 1998/99. The funding council said it would be seeking a 3 per cent growth in funded units next year, down approximately 2 per cent, and it believed the sector could still achieve the overall growth target. Efficiency gains of more than 5 per cent a year for the next three years are also assumed in the settlement.

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At its meeting last week the funding council allocated Pounds 2.966 million for recurrent and capital purposes. It set aside Pounds 82 million for commitments including restructuring claims, students with learning difficulties, local education authority debt finance and the council's own running costs.