Hard-up colleges anticipating future redundancies have forced the Further Education Funding Council to consider reviving its restructuring scheme.
The announcement last week that De la Salle sixth-form college in Salford was to close - the first further education institution to fail - has highlighted fears about the sector's future.
The restructuring scheme, introduced after incorporation to help colleges with redundancy costs, paid out Pounds 43.2 million before finishing in July. But colleges expecting a grim Budget for the sector have asked the FEFC to bring it back next year.
FEFC officials are examining a variety of options, which could involve introducing a new scheme, and will make a decision at a meeting of the council December.
Under the original system, cash was top-sliced from the total funding allocation. This made the scheme unpopular with colleges facing few staff losses. An FEFC spokeswoman said: "We are aware that some colleges would like us to consider starting the fund again but every pound spent on restructuring is a pound not spent on unit costs."
Even a standstill Budget is likely to lead to compulsory redundancies, forced mergers and closures, supporting the sector's belief that it still has no clout in Whitehall.
Patricia Twyman, principal of Bournville College of Further Education, said most colleges were waiting in trepidation for the Budget announcement. "We struggle here, with no reserves," she said. "We stagger on from year to year."
The college has had two rounds of redundancies, losing 60 people including business and support staff, in the last two years.
Last year's deficit at York College of Further and Higher Education was about Pounds 500,000 and it reduced staffing by 10 per cent. The previous year, the senior management team was cut from 13 to seven.
Wigan and Leigh College has a Pounds 100,000 surplus but has made 59 voluntary redundancies in the past 18 months. It estimates that it will lose Pounds 750,000 from FEFC reductions in capital funding if it merely stands still.
Pay rises and incremental increases are a worry with incremental payments alone costing the college some Pounds 250,000 a year, for which there is no provision.
"We have some serious planning to do," said principal Margaret Murdin. "We will have to make whatever reductions are necessary but we don't intend to cut courses."
Two years ago, Sandwell College made 160 redundancies and is still paying restructuring costs, although it has a surplus. "We made the decision to grasp the nettle and that proves to have been a good decision," said principal Douglas Keith. "Others seem to have thought someone was going to bail them out and they are now looking down a black hole."
Wirral Metropolitan College claims the worst deficit in the United Kingdom, which runs to "several millions" according to its business director, Ron Millington. A financial recovery plan introduced last year has involved well over 100 redundancies and severe cutbacks in accommodation.
Mr Millington said: "There is no question that we are going to survive but hard decisions will have to be made about provision and accommodation."
Barnsley College had a turnover last year of Pounds 22 million. It entered incorporation with a deficit of Pounds 1.9 million and has been in surplus ever since, just keeping its head above the water. It anticipates an out-turn this year of Pounds 39,000.
David Eade, the principal said: "If more efficiency savings are required, the sector would find it very difficult. The greatest problem we face is capital support. Staffing levels are protected first so other aspects go under-funded.
"We have not been able to contribute enough money to capital budgets to replace existing equipment and purchase new," he said.
Lewisham College, which has grown 30 per cent in the past three years, is facing a deficit of Pounds 300,000 next year and Pounds 1.3 million after that. Principal Ruth Silver favours convergence - bringing colleges to a similar level of funding - but not too quickly. "I have seen my average level of per capita funding fall from Pounds 28 to Pounds 13 in three years," she said. "We will try to grow our way out of it but I see this as a culling of the colleges."
Sheffield College is contemplating losing more staff after 150 teaching redundancies in the last 18 months. Its current deficit, including provision for early retirements, is Pounds 5 million.The college was planning expansion but found its numbers capped, giving a funding shortfall of Pounds 1.8 million.
In the past three years, Wakefield College has lost 200 academic posts, even with the FEFC restructuring scheme.
A spokeswoman for the FEFC said that with projections of an Pounds 82 million deficit in the sector there was no doubt colleges were hurting.
But she insisted that poor enrolments rather than lack of funding caused the closure of De la Salle, one of the highest-funded colleges in the region.