Welsh universities may be forced into mergers if they want a share of a multi million-pound pot set aside by the Welsh Assembly Government to develop higher education in the principality.
The new Welsh Assembly Government Education Minister Jane Hutt has told The Times Higher that she is determined to "quicken the pace" on the so-called "reconfiguration and collaboration" agenda that aims to make Welsh higher education stronger by forging closer formal ties between institutions.
A fund worth £70 million - representing nearly a fifth of the annual funding council income for the sector in Wales - is currently earmarked to support Welsh universities that are prepared to work towards mergers or strong alliances involving shared resources and staff.
Ms Hutt said that, in the face of a tough budget review being conducted by the newly formed Welsh Assembly Government, higher education institutions would need to show that they are prepared to make significant changes in return for any increased investment.
She said: "We have our reconfiguration and collaboration pot, and we have to show that we are willing to use it well and that there is a willingness to move forward on this and quicken the pace."
So far the greatest beneficiary of the fund has been Cardiff University, which merged with the former University of Wales College of Medicine three years ago. The Cardiff merger is being held up by Assembly ministers as a model for future developments.
But attempts by other institutions in Wales to secure a merger have so far failed. Merger talks between the University of Wales Institute of Cardiff, the University of Wales Newport and Glamorgan University have twice collapsed.
Merger talks between Bangor University and the North East Wales Institute of higher education were called off three years ago.
Ms Hutt said that while she was happy to support other forms of collaboration, such as the new Wales Institute for Mathematical and Computational Science recently formed by Cardiff, Swansea, Aberystwyth and Bangor universities, she refused to rule out the need for more mergers in Wales.
She said: "As a new minister, I feel that we have to lift up this agenda and raise the stakes.
"I have to take stock of where we are, and consider whether collaboration alone is enough.
"I need to revisit the history of attempts to move forward on collaborative approaches that could lead to merger."
Higher Education Wales (Hew), the body that represents Welsh vice-chancellors, said it would like to see the reconfiguration pot extended to also support collaboration between institutions in Wales and England.
Hew's director, Amanda Wilkinson, said: "It has to be remembered that we are not an island and that we do sit within the UK system. But policy between England and Wales is diverging, so the issue is how institutions can collaborate in that context. It's not a question of will - it's just that that is not necessarily an easy thing to manage."
Hew is also pressing for the new Assembly Government to address a "funding gap" between Welsh and English higher education, estimated by funding council analysts to be as high as £40 million a year.
Margaret Phelan, representing post-92 universities for the University and College Union in Wales, predicted that courses in expensive subject areas would fold if the funding gap was not closed.
She said: "We will not accept that there is nothing the Assembly Government can do about the funding gap. If they fail to address it, then HE in Wales will be damaged."