The closure of De La Salle Sixth Form College in Salford highlights the fragile financial state of the further education sector, which is facing a massive trading loss according to the latest figures.
A report based on returns from more than 400 colleges predicting their position at the end of last July shows a trading loss, which takes into account capital and current spending, of Pounds 77 million.
The Association of Colleges described the figures as very worrying and said they showed more money was needed in the sector, not less as planned under continuing efficiency savings.
According to the analysis by the AOC, colleges were also facing a cash shortfall, worked out according to the total amount of income and expenditure, of Pounds 52.7m.
The report also brought bad news for the Government's policy of encouraging private sector finance and sponsorship.
It showed income from sources other than the Further Education Funding Council, including grants and private sector money, fell from 31.8 per cent three years ago to 26 per cent last year.
John Brennan, director of development at the AOC, said: "These figures provide very worrying evidence of the financial health of the sector. The Government has failed to provide the resources further education needs to deliver the high quality education and training we are continually being told the nation needs. More money needs to be pumped into the system." He said private sector companies were less likely to invest in colleges if they were in a weak financial state.
The FEFC said De La Salle College closed because of falling enrolments after a poor inspection report. It said if enrolments had met targets the college's grant would have increased.
But Mr Brennan said: "Small colleges which do not have the advantage of economies of scale and the ability to develop expertise in all areas find it more difficult to maintain financial viability and quality of provision. "
The FEFC confirmed the figures were correct. A spokesman said: "They confirm that the financial health of the sector is deteriorating."