Bristol Medical School, one of the oldest in the country, is in financial difficulties after its poor result in the research assessment exercise resulted in a loss of £1.2 million.
The school teaches about 750 medical students and is set to expand its intake by 70 this autumn. It received a 3a for its hospital-based clinical subjects in the 2001 RAE.
Vice-chancellor Eric Thomas said: "The school's QR funding (research funding from the Higher Education Funding Council for England) will fall from £1.8 million to £600,000."
Professor Thomas took over at Bristol at the start of this academic year and one of his first acts was to initiate an external review that is to report soon. As well as a poor RAE rating, the school has received a poor teaching quality assessment.
Professor Thomas stressed that the future of the medical school was not in doubt and that it was not making redundancies.
Michael Rees, professor of clinical radiology at Bristol and deputy chair of the British Medical Association's medical academic staff committee, said: "The RAE has created huge problems for a medical school that is successfully teaching hundreds of undergraduates."
The failure to fund the RAE fully and changes in the way money is allocated have had a devastating impact on medical schools, and the BMA warned this week that schools would not be able to deliver the government's targets for increased student numbers.
Speaking at a conference of medical academics, Colin Smith, chair of the BMA's medical academic staff committee, said half of medical schools would have their budgets cut next year.
Edinburgh received a 5* rating but lost £1.6 million. A number of London schools are already making redundancies, and Dr Smith warned that Leicester, Leeds and Newcastle are set to follow.
The Council of Heads of Medical Schools has written to all schools asking them if they can afford to recruit the staff needed to teach the extra medical students. Of those replying, 80 per cent say they have imposed a freeze on posts and blame the RAE.
A survey of clinical academics by the Association of University Teachers has found that in England in the two years to 2000-01, when the student intake was expected to increase by about 18 per cent, full-time teaching staff numbers fell.
Dr Smith also warned of a lack of preparation for the new consultants'
contract. "Universities have not taken any steps to secure appropriate funding for the changes coming their way," he said.
A spokesperson for the Department of Health said expanding medical schools had been provided with extra cash for new staff and that the DoH was working with Hefce to monitor the expansion.