The Manchester College has signed an agreement with the University of Salford that marks the first step towards a federation or even merger.

Peter Tavernor, the college principal, said the deal could ultimately lead to a single institution that, at today’s income, would have a combined budget of pound;340 million and 200,000 students.

It would be involved in education from secondary level, with the college’s sponsorship of seven academies, right through to PhDs.

In the first instance, the collaboration, sealed with a memorandum of understanding due to be signed today, is expected to involve the creation of a federated board of overnors, involving members from both institutions.

Mr Tavernor said he hoped one of the early benefits would be to create part-time degree-level courses aimed at getting staff in professions from social work to the police out of the “graduate trap”, where their promotion routes were blocked through lack of higher qualifications.

“We are both consenting adults in moving towards this memorandum of understanding,” he said. “This could end in a federation. It could result in a merger of institutions.

“People often say they are student-focused but they’re institutionally driven. This shakes up conventions - that’s exactly what The Manchester College and the University of Salford are up for.”

Mr Tavernor said they would make savings from shared backroom services, but would also be able to become more effective educationally by combining curriculum expertise and sharing facilities.

“It’s certainly not a decision made out of desperation: it’s an opportunity,” he said.

The recent history of mergers between universities and colleges has not always been good, with Reading College separating from Thames Valley University, now the University of West London.

But unusually in The Manchester College’s case, it will be the senior partner, with a greater turnover at about pound;180 million to Salford’s pound;160 million.

Professor Martin Hall, vice-chancellor of the University of Salford, said: “This is the beginning of an important new chapter in the history of further and higher education in the North West and wider UK.”

The Manchester College has also drawn up a partnership agreement with Salford City College.