The axe is hanging over plans for the new university at Coate Water.

It is understood the university senate will today consider a recommendation that it no longer pursues the controversial proposal of setting up a campus at Coate.

The move has been prompted by difficulties with final negotiations over the amount of housing to go on the site as well as fears that Government funding is moving away from paying for new campuses and more towards extending existing colleges.

Any decision will have to go through the university's full council, expected to meet on March 1, but insiders believe the report will be ratified.

The university has refused to give details of the report, other than to confirm that the "Senate will discuss the developments that have been occurring in relation to the masterplan proposed by Persim-mon and Redrow for the Gateway site and the publicly announced changes to priorities for public spending for the higher education sector".

Council leader Roderick Bluh said the borough was aware there was a possibility the university could abandon the town.

"I think it's disappointing news for Swindon," Coun Bluh said.

"We have to be positive and immediately start to explore new and exciting opportunities.

"An area like Swindon which is undergoing a multi-million pound regeneration and rapid growth into a regional centre must also aspire to have a first class academic offering.

"In recent times the University of Bath has obviously been the outstanding candidate to provide this.

"The university's decision is out of the council's control but our commitment to developing first class further education opportunities that best suit the needs of the borough remains.

"We will work with stakeholders, the business community, and new and existing partners to achieve this ambition."

Without the university, there will be no housing at Coate.

"Our position has been very consistent," Coun Bluh said.

"There was only ever support for development at Coate Water in the area south of Day House Lane as long as it enabled provision for a university campus.

"Without a campus there is no need for housing or employment development.

"The Local Plan Inspector very clearly supports this view in his 2005 report.

"In addition I can assure local people that the council we will also be looking to exert as much control as possible on any development in the area north of Day House Lane. "

The suggestion Bath might be pulling out has raised other possibilities.

Dave Penney, spokesman for Oxford Brookes university, which also has facilities in Swindon, said: "We would however be happy to discuss with Swindon Council about an expanded presence for Brookes in Swindon."

North Swindon MP Michael Wills said the town needs a university.

"The decision still has to be taken but my view remains that it's very important for Swindon to get a university," Mr Wills said.

"Obviously, there are issues of concern here and I very much hope they can be resolved."

South Swindon MP Anne Snelgrove said the university was the only reason to sacrifice Coate Water.

She said the town still needed the university. "It would be a huge disappointment for Swindon to lose the university," Mrs Snelgrove said.

Without it, she called on the council to shelve all plans for housing in the area.

"The danger of this plan is to end up with no university and more housing."

Mrs Snelgrove said the council should now guarantee "no university, no housing" at Coate.

"The decision has not yet been taken by the university and I very much hope they continue their plans to come to Swindon," Mrs Snelgrove said.

"In the long term, the university will be excellent for Swindon and its young people."

Mrs Snelgrove said Coate was still valuable. "It would be horrendous if we just got housing and not a university," she said.

Chris Hutchings, of the New Swindon Company, said he did not expect the university to pull out of Swindon.

"I think you're being somewhat premature," he said. "They have a senate meeting when it will be discussed and it will still have to go to the full council on March 1.

"This is the sort of thing they have had a number of times before."