Universities planning mergers with further education colleges could find their plans referred to the Monopolies and Mergers Commission.

A growing number of colleges are known to be in merger talks but it emerged this week that they are encountering resistance from members of the Further Education Funding Council who are making "hostile" noises about their prospects. At least one college principal has been told he could be referred to the Monopolies Commission if he goes ahead with merger talks with a university.

The FEFC is officially neutral on the question of mergers with ÖйúAƬ institutions but at a private meeting in Sheffield last week chief executive Sir William Stubbs expressed strong reservations.

His sceptical comments appear to be mirrored by some regional funding council officials who have been "hostile" and "not at all friendly" towards colleges in merger talks. One principal who asked not to be named said he had been shocked by the reception he had received from the official. "It is wrong for the funding council to be warning us off," he said.

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Interest in closer ties with colleges is reaching unprecedented levels particularly within the new university sector. Roger Waterhouse, vice chancellor of Derby University, which is in merger talks with five neighbouring FE colleges, said he would not be thrown off course. "We are convinced this is the right way forward and we are sticking to our timescale," he said.

Chris Pratt, principal of Airedale and Wharfedale College, which is talking to Leeds Metropolitan University about a merger, said: "It doesn't have to be the case that the FE mission is diminished, in fact it could be strengthened. People shouldn't jump to conclusions."

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Both Mr Pratt and LMU vice chancellor Leslie Wagner said it was time for a national debate on the artificial divide betweenfurther and ÖйúAƬ. Critics of cross-sector mergers have raised concerns about the loss of identity of further education and the possibility of takeovers and even asset stripping by more powerful institutions.

An FEFC spokeswoman said no formal merger proposals had been received. She stressed that stringent criteria would be applied to any proposals which would need to prove that FE provision would not be damaged and that all the alternatives had been properly considered and costed. She added that large-scale mergers would present "significant challenges" to any management structure.