Manchester University and Imperial College - the third and fifth largest recipients of funding council research money - have dropped into the safety net provided for losers in ÖйúAƬ Funding Council for England allocations for 1995/96.

They are among nine institutions which receive a transitional funding supplement to bring them up to the minimum 0.5 per cent cash increase above the 1994/95 allocation. With 3.25 per cent assumed for inflation this means a 2.5 per cent cut in real terms.

They have fallen victim to the findings of HEFCE's survey of research activity - using such indicators as the number of research students and fellows. Graeme Davies, chief executive of HEFCE, said: "There has been a lot of growth across the system as a whole. If you are above the average increase, money flows towards you. If you are below, the converse applies - and in the case of big earners like Manchester and Imperial marginal shifts mean quite a lot of money." Sharp increases in research activity explain relative winners such as Sheffield and Lancaster, both up 3.1 per cent on 1994/95.

He said that the main purpose of the allocations, the third made by HEFCE, was to preserve stability within the system. "A couple of years of stability and provision for further consolidation of the infrastructure in preparation for the next round of changes can't do any harm," he said.

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Institutions have been allocated a total of Pounds 3,207 million, divided between Pounds 2,0 million for teaching, Pounds 636 million for research, Pounds 287 million of non-formula money and Pounds 14 million of transitional funding and flexibility margin. Of the teaching money, Pounds 60 million is non-core funding. Recurrent funding for teaching and research shows an overall cash increase of 2.1 per cent. The system as a whole is contracted to deliver 1,137,000 students - 7,000 full-time and 410,000 part-time.

Of the 137 institutions directly funded by HEFCE, 91 have received between 1.5 per cent and 3 per cent more. Among the winners some such as Cambridge (5.5 per cent) and Oxford (3.5 per cent) gained from the removal of research funding caps, with the biggest proportionate winner, London Business School (up 12.4 per cent), benefiting in addition from the shift in research fund weighting towards business studies, media and communication and art and design. Subject shifts also account for the success of the University of Derby, up 3.5 per cent.

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There are also benefits in appearing at the other end of the list. Aston University, safety-netted for the third year running, will have received a total of more than Pounds 3 million in transitional funding supplement by the time the 1995/96 money is paid.

The Association of University teachers said the allocations promised "an even grimmer year". David Triesman, general secretary, said: "The damage to the quality of the university system in yet another round of real-terms cuts is incalculable. "