Multimillion pound savings are being sought at one of the United Kingdom's most successful universities, which is proposing to worsen its staff-student ratio by offering early retirement to all staff aged over 50.

Nottingham University is one of the UK's top-rated research institutions and one of the most sought after by students. The university refused to say exactly how much it was being forced to cut, but confirmed it was in the multimillions.

Lawrie Challis, pro vice chancellor for staffing, said that although Nottingham had fared better than most during the last round of funding cuts, it was still facing a 5 per cent cut in real terms. In order to bring income and expenditure into line the plan was to spend Pounds 4.6 million on an extended early retirement scheme.

"This is a regrettable measure but short-term predictions for Government funding are not optimistic and we regard these measures as financially prudent, enabling us to continue to invest for the future," Professor Challis said.

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Letters containing details of the early retirement scheme have been sent to 350 eligible academic staff this week but Professor Challis declined to confirm trade union fears that 200 jobs could be shed. "That seems on the high side according to our model," he said.

Professor Challis acknowledged concerns over workloads for remaining staff and said that measures to take administrative work away from academic departments were under way. The staff-student ratio will worsen by 5 per cent.

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The Association of University Teachers has been dismayed by the news. "It is ironic that Nottingham should have been forced to make such an announcement when its chancellor is Sir Ron Dearing who has been asked to head an inquiry into higher education," said Martin Machon, assistant general secretary of the AUT.

Sandi Golbey, local AUT official, said that while there was sympathy for the university's predicament, "there is confusion here about who to blame and worries that those who do go will be the highly skilled people we really need." No proper consultations had taken place with campus unions, she added.