Uncertainties over future funding have made a plan to merge two London higher education institutions "too risky", it has been claimed.

St George's, University of London, and Royal Holloway, University of London, announced their intention to merge a year ago.

But last week, the medical school, based in Tooting, south London, and the Egham-based university said the proposal had been scrapped.

In a message to students, Peter Kopelman, principal of St George's, blames the prevailing financial climate and a lack of agreement on how to proceed.

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"Following a full and detailed discussion of the business case, the wider economic climate and various issues around implementation of the proposed merger, it was agreed that on balance it is in our best interests to continue to work together as independent colleges within the University of London," he says.

He adds that differing views on implementation and the funding uncertainties made the merger "too high a risk".

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In a joint statement, the heads of the institutions express their disappointment that the merger has fallen through.

But they add that Royal Holloway and St George's will continue to work closely together, for example on health and social-care programmes offered through the South West London Academic Network, which also includes Kingston University and was established in 2007.

Rob Kemp, acting principal of Royal Holloway, said: "While this outcome is disappointing to all of us at both colleges who have put in so much hard work, I am confident that we can continue to work together as strong independent colleges."

In October last year, David Lammy, the Higher Education Minister, said that more mergers in the sector would be likely in future.

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In April, a report by Policy Exchange, the right-wing think-tank, raised questions about the viability of London having 42 separate higher education institutions.

rebecca.attwood@tsleducation.com.