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Universities in Wales have been dealt budget cuts of more than 5% this year, figures from their funding body reveal.

Teaching budgets are being reduced by 8.5%, although there will be no reduction in research funding in cash terms.

The cuts are roughly on a par with those facing English universities.

Higher Education Funding Council for Wales (HEFCW) said it was a "challenging settlement" but it had "worked to allocate funding fairly".

The University and College Union (UCU) said the reductions would have a "tremendously debilitating effect on staff and students".

Wales' biggest university, Cardiff, will see its budget cut by 3%.

However, the second largest institution, Glamorgan, faces a cut of nearer 8%.

The University of Wales Trinity Saint David has been dealt the largest cut of nearly 9%, while the University of Wales Institute Cardiff (UWIC) faces a cut of almost 8%.

Swansea Metropolitan University and the Open University both receive modest increases of 1% and 2% respectively.

The cuts mean universities will have to make difficult decisions about redundancies and course closures.

In a memo to staff seen by ´óÏó´«Ã½ Wales, the director of finance at UWIC has said it must making savings of £3m.

It has invited applications for voluntary redundancy but will make compulsory redundancies if necessary.

"UWIC is beginning the process of reducing the number of staff posts now as it is necessary to achieve savings before the start of the next academic year given the much-reduced level of funding," it says.

In January, ´óÏó´«Ã½ Wales revealed six courses were to be axed at the university's school of art, resulting in 35 job losses.

According to the memo, other universities face a similar dilemma.

Dr Russell Smith, from the UCU, said the cuts would have a "tremendously debilitating effect on staff and students".

"It's going to mean fewer students, fewer staff and fewer courses in Welsh universities," he said.

"However, I certainly think that even with the cuts this deep, the universities can meet these cost cuts without making compulsory redundancies."

Ken Richards, an economist who has advised the assembly government on higher education funding, said the cuts meant staff-student ratios would get worse.

"Universities will have to employ fewer staff to teach the same number of students," he said.

For the first time the funding allocations, set by HEFCW, end minimum payments and so-called "safety netting" for smaller institutions, which protected them from financial difficulty.

The aim is to put pressure on smaller universities to consider mergers with other institutions.

HEFCW has said the number of universities in Wales should be reduced from 10 to six by 2013, with institutions merging on a regional basis.

"The public spending context makes this, unavoidably, a challenging settlement," said HEFCW chief executive Professor Philip Gummett.

"We have worked to allocate funding fairly, but also robustly in terms of institutional performance against key objectives.

"We have focused on supporting the priorities that impact most upon social justice and the economy in Wales."

´óÏó´«Ã½ Wales revealed in November that HEFCW had concerns about the long-term financial sustainability of five of Wales' 10 universities.

First degree courses

The budget cuts put university finances under further pressure as they already lose out by £80m per year compared to funding levels in England.

This month, ´óÏó´«Ã½ Wales revealed that places at Welsh universities would decrease this year for the first time due to a new cap on student numbers, which will limit institutions' income from tuition fees.

From September 2012 universities will be able to charge tuition fees of between £4,000 and £9,000, while teaching budgets will be cut by 35%.

The assembly government has said the additional fee income should ensure finances remain consistent, although this will depend on the level of fees universities can charge.

Meanwhile, new figures show a higher percentage of young students taking full-time first degree courses in Wales come from state schools compared with the rest of the UK.

According to the Higher Education Statistics Agency in Wales 93.2% came from state schools compared to 88.8% in the UK as a whole.

The number of young students dropping out of degree courses after their first year in Wales is falling.

In 2007/08 7.4% did not continue to a second year but that fell to 6.1% in 2008/09, compared with a UK average of 6.5%.