Swansea Institute of Higher Education is to abandon the battle for survival as an independent institution and seek a link-up with the University of Wales, Swansea or the University of Glamorgan.
A working group set up earlier in the year to consider the institute's future has concluded: "The long-term future of the institute does not lie in preserving its independence."
Last year the institute was in the news after adverse quality reports on courses franchished overseas and rows that led to Gerald Stockdale's departure as principal.
But the report, which has been obtained by The THES, says the long-term worries are the result of external factors that "make it extremely vulnerable, and if its mission and its valuable work are to be preserved and enhanced, some form of alliance appears to be inevitable".
The external factors are:
* the fact that 80 per cent of entrants to higher education look for "university" in the title of their place of study. The institute has little chance of winning the title in the near future
* more competition from franchised higher education courses in colleges of further education
* the likely drop in applications in the next few years, pushing universities into competition for students who would otherwise choose to go to the institute.
The working group has had meetings with the vice chancellors of both the Swansea and Glamorgan universities. There have also been meetings between some departments at the two Swansea institutions.
The next step will be considered next month by the institute's governors. Ken Reid, acting principal of the institute, said he did not wish to comment at this stage.
Adrian Webb, vice chancellor of the University of Glamorgan, said: "It is entirely up to the institute to decide where their future lies."
Rhys Williams, pro vice chancellor of the University of Wales, Swansea, said: "We have been considering the implications of links, which might take the form of collaboration between us or of a merger with the institute."
He said that a link-up would make a great deal of sense because Swansea is not large enough to sustain two higher education institutions. "But we do not want it just to be a straight takeover by us - the institute has distinct strengths of its own that should be preserved," Mr Williams said.
The institute has about 2,500 full-time and 1,000 part-time students.