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Some of the UK's most prestigious universities have had their funding cut as higher education's traditional hierarchy took a hit at the hands of the 2008 research assessment exercise settlement.

The Higher Education Funding Council for England announced allocations of almost ?8 billion to English institutions for 2009-10, including ?1.6 billion for research and ?4.8 billion for teaching.

David Eastwood, chief executive of Hefce, said the overall settlement was good. In cash terms it represented a 4 per cent increase on last year, which in real terms equated to a 2 per cent rise, with inflation standing at 2 per cent.

He stressed that the unit of resource for teaching had been maintained, and funding for research had increased by 7.7 per cent.

"This settlement provides universities and colleges with resources to help weather the economic downturn," he said, although he added that they still faced longer-term difficulties and would need to plan prudently and invest selectively.

But the overall settlement masks dramatic changes to the funding landscape caused by the 2008 RAE - the first appraisal of universities' research strengths for seven years and the basis for quality-related (QR) research allocations.

The London School of Economics and Political Science, the School of Oriental and African Studies, the University of Essex and the London Business School were among those to suffer actual cuts.

Imperial College London, King's College London and the universities of Surrey, Birmingham, Southampton and Sheffield are some that see real-term reductions (increases below the rate of inflation).

Major winners included Queen Mary, University of London, and the universities of Exeter, Liverpool, Nottingham and Plymouth, which received increases above 8 per cent.

Overall, 87 institutions received above-inflation rises in their total grant compared with last year, but 41 saw either real-term or cash cuts. Of these, 15 saw the latter.

The allocations have confirmed the fears of some large research-intensive universities that the 2008 RAE would hit them in the pocket. The steady concentration of QR cash in the hands of the elite over successive RAEs has been reversed.

The 2008 exercise discovered many research "pockets of excellence" in the teaching-led post-1992 universities. As a result, QR funding has been more widely distributed across the sector.

Some 75 per cent of QR cash previously went to 22 institutions, but has now been shared among 26. The share of mainstream QR funding received by the research-led Russell Group universities dropped from 65 per cent to 60 per cent.

Some 25 institutions have been awarded QR funding for the first time, and institutions that only became universities in recent years have seen significant increases.

The University of Worcester was awarded a total grant increase of 8.4 per cent to ?17 million. The University of Winchester witnessed a 5.2 per cent uplift.

Professor Eastwood said that the RAE was the "major reason" for significant variations in institutions' total recurrent grant funding levels between 2008-09 and 2009-10.

But some changes are masked by ?24 million in moderation funding provided to enable institutions to manage changes in funding levels caused by the settlement.

Reflecting disappointing RAE results, the five universities that received the most amelioration were Imperial, the University of Reading, the University of the Arts London, the University of Southampton and the Institute of Cancer Research.

Southampton saw a 1.7 per cent total increase, despite a 6.9 per cent fall in its research funding for 2009-10 - the biggest such cut among the large research-intensive universities.

Imperial saw a 5.1 per cent cut in research funds to ?92.7 million, and a sub-inflation increase to its total Hefce grant of 0.1 per cent. The total grant to the LSE dropped by 0.8 per cent, dragged down by a research funding cut.

The University of Oxford stole a march on its ancient rival, the University of Cambridge.

Oxford was awarded a 4.7 per cent increase in its total funding to ?187 million, bolstered by an 8 per cent rise in research cash. By contrast, Cambridge's total funding increased by 2.1 per cent to ?181 million.

The overall allocations provided ?4.78 billion for teaching, including ?269 million for teaching enhancement and student success, and ?143 million to widen participation.

A comparison of "like-for-like" figures given to Times Higher Education by Hefce showed that the London Business School saw the biggest percentage drop in teaching cash - down 56 per cent after a review of funding for small and specialist institutions led to its losing its premium.

Its overall funding fell 0.9 per cent to ?6.7 million.

Thames Valley University also saw a decline in teaching cash (down 3 per cent), partly due to the under-recruitment of students. It was the biggest loser of the allocation round. Its total grant fell by almost 12 per cent to ?30.2 million.

Institutions feeling the impact of the Government's decision to cut funding to students studying ELQs (qualifications at an equivalent or lower level to those they already hold) included the Institute of Education and Goldsmiths, University of London. Both witnessed a drop in teaching funds of about 3 per cent.

Goldsmiths' total funding was cut by 1.5 per cent down to ?26.4 million, while the Institute of Education's cash was cut by 2.1 per cent to ?14.2 million.

Where higher education institutions saw a significant rise in teaching grant, this was mostly due to Hefce approving their bids for additional student numbers.

Institutions receiving big increases in teaching cash included the Guildhall School of Music and Drama (up 15 per cent), Harper Adams University College (14 per cent), Bishop Grosseteste University College Lincoln (12 per cent), Edge Hill University (9 per cent) and the University of Teesside (9 per cent).

Allocations at a glance

• Total funding for 2009-10 is ?7.99 billion ¨C 4 per cent up on last year
• Total funding for teaching is ?4.78 billion
• Total funding for research is ?1.57 billion
• 87 institutions have been awarded above-inflation total funding increases
• 41 institutions have seen real-term funding cuts
• 15 institutions have seen cash cuts

Share of total recurrent grant by mission groups

• Russell Group 33.2%
• 1994 Group 14.1%
• Million+ 17.5%
• Other 35.2%

As the figures are for England only, the Russell Group includes 16 large research-universities, the 1994 Group 18 smaller research-intensive universities and the Million+ group represents 24 post-1992 universities.