Wales' oldest university, Lampeter, is to merge and lose its name in a move that union officials fear may lead to half the staff being made redundant.
The governing bodies of Trinity University College and the University of Wales Lampeter decided yesterday to merge, after starting negotiations in December last year.
The two will become one institution – the University of Wales, Trinity Saint David – by July this year, and be led by Dr Medwin Hughes, Trinity's current principal.
The loss of a separate identity for Lampeter after 187 years follows a long period of decline at the oldest – and smallest – degree-awarding institution in Wales. With fewer than 8,000 students, the university has struggled financially. Its idyllic rural location is too far from the nightspots of Cardiff to attract enough undergraduates.
A Quality Assurance Agency report in 2007 warned of "limited confidence" in the university's management and ability to ensure academic standards.
A critical report from the Higher Education Funding Council for Wales followed in June last year. It called for interim management to be put in place and raised the possibility of a merger to save the institution.
The then vice-chancellor, Prof Robert Pearce, went on sick leave and retired in September last year, while pro vice-chancellor Barry Burnham also resigned.
Alfred Morris, former vice-chancellor of the University of the West of England, was appointed to lead the institution and "explore partnership possibilities".
Morris, who said the combination of Lampeter and Trinity held the prospect of more than the sum of the parts, conceded: "We are facing some financial difficulties, in common with other universities in Wales and the rest of the UK. It's probably more severe for us than for many because we are a small institution to start with and more affected by changes in the funding council's methodologies and policies."
The funding letter the university received, including income based on its Research Assessment Exercise results, pointed to a potential deficit of £2m next year if the university did nothing to intervene, he said.
"If we simply extrapolated income and expenditure and took no further steps, the answer would or could be something like a £2m deficit. But the important point is that we did take steps and there are new developments coming on stream," he said. New options on masters programmes, he added, would bring in more students.
"People will be concerned, but the spirit is good and we are collaborating and co-operating and doing all we can to mitigate the adverse consequences," he said.
"There was no decision yesterday to set up a redundancy committee, and that's not at this stage where we are at. We're looking at how to generate additional income."
But University and College Union officials say Lampeter has a £2m shortfall in funding next year, which "would inevitably lead to redundancies" estimated at between 40 and 60 job losses of a total academic staff of 80.
One local UCU official said: "UCU would co-operate with voluntary redundancies but oppose compulsory redundancies and we will mount a robust campaign against that, which could potentially threaten the success of the merger."