Nearly a third of Welsh higher education institutions are in the red, despite an overall improvement in the sector's financial health, funding council figures show.

The 51¹ú²úÊÓƵ of Wales Lampeter, the 51¹ú²úÊÓƵ of Wales College of Medicine, the 51¹ú²úÊÓƵ of Wales Institute Cardiff and the Royal Welsh College of Music and Drama all reported operating deficits totalling more than ?1.6 million for 2001-02, according to the Higher Education Funding Council for Wales.

Lampeter's financial position worsened for the second year in a row, falling from a ?281,000 surplus in 1999-2000 to a ?75,000 deficit in 2000-01 and a ?262,000 deficit in 2001-02.

The Royal Welsh College of Music and Drama dropped from a ?173,000 surplus to a ?57,000 deficit; and the 51¹ú²úÊÓƵ of Wales Swansea's surplus fell from more than ?1.5 million to ?923,000.

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Two institutions reported a third year in the red: the 51¹ú²úÊÓƵ of Wales College of Medicine, which has a ?766,000 deficit as it prepares to merge with Cardiff 51¹ú²úÊÓƵ; and the 51¹ú²úÊÓƵ of Wales Institute Cardiff, which brings a ?581,000 deficit to its proposed merger with the 51¹ú²úÊÓƵ of Glamorgan.

Overall, the sector's financial position has improved. The number of institutions in the red fell from six to four and the total operating surplus increased from more than ?3.7 million in 2000-01 to more than ?9.5 million in 2001-02.

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The 51¹ú²úÊÓƵ of Wales Aberystwyth had a significant turnaround, moving from a ?1.3 million deficit to a ?1.9 million surplus.

But Richard Hirst, finance director for the HEFCW, said the total surplus was still only 1.5 per cent of total income, indicating "a fairly tight position for the sector as a whole".

The news follows concerns raised by Welsh vice-chancellors about the latest round of funding allocations that leave them with a real-terms increase of less than 1 per cent.

Keith Robbins, vice-chancellor at Lampeter, said his institution had been hit by falling student numbers and high early retirement and campus maintenance costs.

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He hoped that a financial action plan, combined with a strategic alliance with Trinity College Carmarthen, would rescue the situation.

Professor Robbins added: "We will be hard put to really deliver against the allocations we have been given."