Universities up and down Britain this week announced job cuts as they struggled to balance their books in the face of falling student numbers and budget cuts.

Staff at the University of Manchester Institute of Science and Technology, currently in merger talks with the University of Manchester, were astonished at the announcement of 120 job cuts to deal with a ?3.8 million deficit.

Joe Marsh, secretary of the local Association of University Teachers, said:

"I believe that Umist is now bankrupt. We should be under no illusions, we face a very difficult future."

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The university said the aim was to reduce the payroll by 6 per cent this September, preferably through voluntary severance or early retirement, with further cuts of 4 per cent brought in by 2004-05.

A spokesman said Umist's problems stemmed from the cost of high-tech equipment, a reduction in real income from government including a 1.7 per cent rise for teaching to cover a 5 per cent increase in staffing costs, and the changes in research funding following the research assessment exercise.

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Strathclyde University plans to axe 150 posts by July 2003, saving ?5 million, to stave off a deficit of ?10 million by 2007. Principal Andrew Hamnett said: "Forward projections of income and expenditure show that our current position is completely unsustainable."

On top of the outcome of the RAE, Strathclyde's financial difficulties have been exacerbated by a U-turn in the Scottish Executive's teacher-training strategy. As Scotland's largest teacher education provider, it could face a ?1 million shortfall through a last-minute cut in student intakes.

As late as February, institutions were being given the go-ahead to expand intakes. But the executive, which has guaranteed all graduates a one-year placement, is cutting numbers following problems in finding posts.

Strathclyde has meanwhile made legally binding offers to applicants and recruited staff.

The Scottish funding council is giving Strathclyde some ?600,000 transitional funding next year, and Professor Hamnett said this and an expected ?300,000 the following year would be used for an early retirement and voluntary severance scheme.

Derby University has told staff that it needs to cut jobs across all schools and departments. Vice-chancellor Roger Waterhouse said he has to save about ?500,000 to put the university on a firmer financial footing.

He told staff this week that voluntary redundancies, early retirement and an overhaul of the university's departmental structures would be required to make it easier for the institution to respond to new markets.

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He said the university wanted to ensure it was ideally positioned to benefit from any extra funding for widening participation, and to be flexible enough to cater for students from a wider range of backgrounds.

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He said: "Applications are up for next year, but it's a question of whether we can retain that."

A further 100 jobs are to go at South Bank University, after staff discovered there were fewer students than had previously been thought. The number of Hefce-funded students was thought to be 8,500 full-time equivalents but the real number is nearer 7,200.

Vice-chancellor Deian Hopkin said: "A lot of our students come and go; they study part-time but they are registered as full-time. And, as we progress into areas where students have lower entry achievements, then our withdrawal rates become high. We have lowered targets and lowered expectations and that has produced a figure which means that we require fewer people to teach."

South Bank's business school - where student demand has fallen most - is likely to be hardest hit.

The plan to shed staff, approved by the governing council last week, forms part of an action plan to bring the university out of special measures after it failed to recruit enough students last year. Overall, the university is seeking to make savings of ?8 million - some ?5 million of which will come from the teaching budget.

Warwick University's prestigious manufacturing group has announced a round of compulsory redundancies in response to falling levels of income from key areas of industry. About seven research staff working on technology transfer projects and developing training for industry are expected to lose their jobs. A university spokesman said undergraduate provision would not be affected by the cutbacks.

Luton University, which made 64 redundancies last year, has re-introduced voluntary redundancies again this year. Cuts are expected primarily in the health-care department, which escaped the axe last time.

Sally Hunt, general secretary of the Association of University Teachers, said: "The morale of university staff is already at a low point, and continued underfunding and redundancies will deliver a savage blow to the profession.

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"Cutbacks and redundancies simply don't add up to government claims about expanding student numbers and investing more money in higher education. Students will begin to feel the impact in the autumn."