THE long-awaited merger between the University of Derby and South East Derbyshire College has fallen victim to the economic crisis.

Plans for the link-up have been in place for more than a year but they have now been vetoed by the Government.

It leaves a question mark over the future of Ilkeston's South East Derbyshire College. It was rated "inadequate" by Ofsted inspectors in June and was £1m in the red in April.

The merger involved a proposal for a new £40m college campus on the site of the former American Adventure, in Shipley Park. Together, the university and college were one of three bidders for the Derbyshire County Council-owned site.

The plan had been submitted to the Government for approval but ministers have blocked it because of the change in economic circumstances. They now want organisations to work in partnership rather than merge. The college is now hoping to partner with Derbyshire County Council to create a new plan for its future.

Local authorities will become responsible for forwarding government money to further education colleges from 2010.

The college recently closed its Cavendish Road site and was preparing to sell off the Ilkeston and Heanor sites to raise money for a new campus.

Phil Fone, acting college principal, said: "The county council owns Shipley Park, so we are still hopeful that some kind of learning centre could be created there."

There had been a question mark over the future of the merger for some time after promised consultation failed to materialise this autumn.

A spokesman for the Department for Innovation, Universities and Skills said: "All mergers are being looked at carefully and only those which are financially robust are being allowed to progress."

Publicly, both the university and college have been upbeat about the merger but, privately, university sources admitted that if the project did not progress soon, time would run out.

The merger was intended to enable the college to be able to offer higher-education courses in addition to the vocational curriculum it has on offer.

Mr Fone said: "The decision not to proceed is in part a reflection of the economic climate and the funding requirements for the proposal."

Professor John Coyne, university vice-chancellor, said: "We have invested a considerable amount of thought, energy, time and enthusiasm to try to get this merger to work.

"We have been thwarted in the end by circumstances beyond our control."

There is now likely to be a review of further education provision in the Heanor and Ilkeston areas.

Councillor Alan Charles, cabinet member for schools, said: "We will look at the college's existing sites and other local authority land. By mid-February, we aim to be in a position to discuss our proposals with the Government."