Reductions in grant funding from the Higher Education Funding Council for England (HEFCE), affecting universities for both the current and next academic year, were announced at the end of January.

Overall funding for the academic year 2010-11 will be reduced by £162 million for teaching (3.5%) and by £27.6 million (1.7%) for research. For the following academic year, teaching grants will fall by a further 4% and research grants by a further 1.1%.

In addition, funding is being withdrawn over the next two to three years for research rated at 2* at the last Research Assessment Exercise (RAE), with funding going only to higher rated (3* and 4*) work.

Some of the smaller funds - e.g. HEIF (the Higher Education Innovation Fund) - remain the same in cash terms. Small amounts of so-called "moderation funding" are to be provided where individual universities would otherwise face significant year-on-year cuts.

Funding for capital spending in universities has been reduced by 60%, leaving £223m for the sector as a whole.

HEFCE has also not ruled out the possibility that these amounts will have to be cut further during the next academic year.

The Director of Finance at Sussex, Allan Spencer, said: "This is a tough settlement, reflecting the funding decisions made in December 2010 by government, and part of widespread reductions in public spending.

"We will see what the specific implications are for the University when our grant letter arrives in March.

"However, our plans for Sussex are based on significant reductions in funding from public sources, and these overall reductions are in line with those expectations.

"This underlines the need to deliver growth from non-publicly funded sources - e.g. by recruiting additional overseas students - and ensuring we support our high-quality academic activity as cost-effectively as possible."

HEFCE has also signalled further reductions in the teaching grant, to be put through when the new fees regime starts in 2012-13. However, there is no indication as yet of how this will be applied to individual universities.

Research funding will be frozen in cash terms until 2015; again, details of funding are not known - but clearly costs will rise faster than income, and a further shift of funding towards 4* research is expected.