LANCASTER University has been given a clean bill of financial health in a report from a city lender.

But the sport by Standard and Poor's warns that the university could face new financial challenges in coming years.

The university has now been given a long term issuer credit rating by the company, which says Lancaster has successfully recovered from the financial problems which saw it struggling for survival.

However, strict Government efficiency targets, the university's high level of debt and its location away from major population centres could all have a negative effect in the future.

The statement was welcomed by the university's director of finance, Euan McGregor.

"This credit rating is a reflection of Lancaster's new financial health, which is crucial for the future of a university ranked among the top 12 UK universities in terms of research and among the top 20 in terms of teaching quality," he said.

"We are extremely pleased at this endorsement, but will not be complacent as there are many financial challenges ahead for us and the university sector as a whole."