It has been a difficult year so far for the University of Bolton.

Student applications through the Universities and Colleges Admissions Service for 2008 fell by 23.5 per cent. Bolton was ranked 112th out of 113 institutions in the annual Good University Guide. It also faces a cut of more than ?1 million after a government decision to stop funding students taking degrees at an equivalent or lower level than they hold (ELQs). And it was named by the House of Commons Public Accounts Committee in March as having the worst dropout rate in the UK - with 18.4 per cent of students not completing courses.

But George Holmes, the vice-chancellor, is unapologetic.

"The drop in applications means we no longer have to deal with applicants who were never going to come to us," he said. In any case, he pointed out, Ucas applications account for only a small proportion of the university's total recruitment, which focuses on mature "career-minded" applicants.

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Dr Holmes said he would like to "strangle" anyone who mentions dropout rates. "When is a dropout a dropout?" he asked, offering the case of a student who left before completing his engineering degree because he had been offered a job. "He is a casualty statistic," Dr Holmes said. "But, thanks to the university, he has gone from being a bricklayer to something he wants to do, with much better prospects."

At the same time, he said, the backgrounds of his students combined with high academic standards at the university mean that some will not be able to cope with the demands. "We have an open policy on entrance and we are very rigorous in terms of our academic standards - it's hardly surprising that a number of people don't meet them.

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"Tougher entrance requirements would go against the university's policy of giving everyone a chance. You can't tell why a person's qualifications are not good until you try them."

Bolton has also been hit by the cuts in ELQ funding - worth ?1.4 million a year to Bolton, which has about 200 such students.

The university has decided not to ask its ELQ students to pay more than the standard tuition fee of ?3,000 a year. "We will subsidise them indefinitely," Dr Holmes said. "They are critical for the North West economy, and it would be breaching our social responsibility to charge them extra."

Despite the setbacks, Dr Holmes insisted that there were many positives for Bolton.

The university is involved in an innovative partnership with Bolton Primary Care Trust to provide an on-campus diagnostic and treatment centre offering GP specialist services and a sports injuries clinic. The arrangement also establishes clinical training areas for the university's healthcare and sports physiology students. There is also a "Bolton wellbeing centre" that will provide sports and exercise facilities.

Another new development is Bolton's campus in Ras Al Khaimah in the United Arab Emirates, which was announced this month. Unlike other universities' overseas campuses, this one will offer a broad range of undergraduate and postgraduate courses including art and design and engineering. The institution will be a joint venture with Kartha Education Society, a group of educational institutions operating in the Middle East and South Asia.

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The new campus will be staffed by a "flying faculty", with academics rotating between the UK and two or three-month stints in the UAE.

"We will take total responsibility for the academic side," Dr Holmes said. "But the debate over who will pay for the buildings is ongoing."

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The university plans a similar set-up in Singapore, to be announced at the end of the year.

The cost of the UAE initiative has not been finalised, but Bolton does not expect to invest more than ?1.5 million. "That's not unmanageable - our surplus will be in excess of that," Dr Holmes said. "We're in a different situation from four years ago, when we were losing ?2.5 million per year."

The vice-chancellor, who joined Bolton in 2005 at the age of 44, said the "best possible interpretation" of those losses was that they were incurred by investment related to gaining the university title, which was awarded in 2004. "The estate was also very inefficient. Now halls are full and generating income."

Despite this, he is keen for the Government to offer more financial support to help institutions improve their estates when they make the transition to full university status.

"I'd like to see part of the Higher Education Funding Council for England grant allocation hypothecated for investment in institutions that have received university title in the past five years.

"We are spending ?30 million, but ?50 million would make the extra difference."

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melanie.newman@tsleducation.com.