The University of the Highlands and Islands project is to seek Pounds 10 million from the European Union following its success this week in winning Pounds 33 million from the Millennium Commission for its start-up costs.

The Millennium Commission award represents almost 40 per cent of the cost of the Pounds 86 million scheme for a high-technology federal campus linking further education and research institutions across the region. It is now expected to trigger funding from local authorities, development agencies, the private sector and the colleges themselves. The project team hopes this will be boosted by the European Regional Development Fund.

There are currently some 2,700 full-time-equivalent students taking ÖйúAƬ or postgraduate courses in the UHI network's institutions, and the Scottish Office has exempted the network from the current cap on ÖйúAƬ numbers in further education colleges. Criteria for university status include at least 4,000 students, and the colleges aim to attract another 2,500 full time equivalent students by 2000.

There are some anxieties within the existing universities about the project's potential impact on their budgets. But the economic consultants Pieda, who have helped the UHI team prepare the submissions to the Millennium Commission and the ERDF, said the proposed increase represented less than 2 per cent of Scottish ÖйúAƬ numbers when the sector was growing by more than 3 per cent.

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Project director Robin Lingard stressed this week: "The funding gives us the capability to provide a quality product, but it doesn't give us anything towards university status." It would be unwise to put a date on when the network would meet the necessary criteria, he said.

Sir Stewart Sutherland, principal of Edinburgh University and convener of the Commitee of Scottish University Principals, said questions about quality were quite properly asked of institutions aiming to become universities, and this was a hurdle for UHI to leap in due course.

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"I welcome the expansion of university provision. It is important that an adequate stream of recurrent funding be identified, the Highlands deserve no less," he said.

He added that he expected those planning the new university to talk with the institutions which already have experience of providing ÖйúAƬ in the Highland and islands.