Universities and further education colleges are wrangling over student places.
This follows a decision to allow further education colleges to bid directly for money from the Higher Education Funding Council for England, which takes over responsibility for funding all degrees, Higher National Diplomas and Higher National Certificates from the Further Education Funding Council in 1999-2000.
More than 13 per cent of all higher education is subcontracted to colleges. The new arrangements could tempt universities to end franchise agreements.
Philip Wookey, deputy vice-chancellor of the University of the West of England, said: "We have formally given notice on present academic arrangements so that we can put new agreements in place. Some of our franchise agreements put an unnecessary burden on colleges and UWE."
He cited the quality inspection regime for franchised courses as an example. Some courses, such as teaching the first year of social science degrees at Chippenham College, will continue. Others, particularly HNCs and HNDs, which are validated by EdExcel rather than UWE, will be re-examined. Between 200 and 300 students could be affected.
Brian Styles, principal of the City of Bristol College, which takes about 250 UWE students a year plus others from Plymouth University, said: "UWE has said that it felt that continuing the present arrangement was not what it intended to do. I understand UWE's position."
Mike Robins, principal of Bridgwater College, which takes about 200 students a year from UWE, said: "It is possible that UWE could withdraw all the student places and their funding. Basically all the options are open and we are looking for the best way forward. We are thinking very hard about going directly to HEFCE for funding."
Other colleges are also examining their franchise agreements. "No university has taken its students back yet but we are expecting to renegotiate," said Gill Young, principal of the Royal Forest of Dean College in Coleford. The college offers higher education courses franchised from the Cheltenham and Gloucester College of Higher Education, plus postgraduate certificates in education franchised from the University of Wales College of Newport.
Mike Goldstein, vice-chancellor of Coventry University, which sub-contracts courses to 25 colleges, said: "Our links with colleges are not simply trading agreements, they are closer than that. I am concerned that the progression from further education to higher education will be hampered by the new funding."