The University of Plymouth has blamed funding cuts for its decision to pull out of a multi-million pound expansion deal.

The university announced this week that it had pulled out of a deal with the Edinburgh-based property developer Peaston Ltd to buy the former Royal Naval Engineering College at Manadon, in Plymouth.

They say that the higher-than-expected cost - at one time estimated at Pounds 30 million - to buy and convert the former Ministry of Defence site was too high, particularly in the light of the funding cuts outlined in the November Budget.

The university had hoped that the imposing hill-top site, set in acres of grounds, would provide a new home for its engineering faculty, relieving congestion at its city centre campus.

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There were also plans for residential accommodation and vice chancellor John Bull had hinted at longterm plans to use the site as a base for the south-west's first undergraduate medical school.

Professor Bull and Victor Parsons, the university's chairman of governors, issued a joint statement on Tuesday which explained the reasons for the decision to pull out: "Our decision not to proceed with Manadon, only made after exhaustive consideration, relates to two factors: cost and the severe impact of the November Budget on higher education."

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The statement explains that the acquisition price was forced above its intrinsic educational value by the competitive tendering process which the Government insists on when disposing of its property.

It says that the university might still have proceeded, despite the extra costs of adapting the site, which required a great deal of infrastructural work, if the growth in higher education had continued at 2 or 3 per cent as projected and had not been affected by the last Budget.

However, it continues: "in the circumstances that now appertain, the acquisition of Manadon would impose too great a financial burden on the university".

The university is now looking to accelerate plans for alternative investment.

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