The crisis at the University of East Anglia has taken an extraordinary turn after 123 academics signed a letter warning the institution was at risk of becoming insolvent.

The letter, which has been seen by this newspaper, was sent a day after the head of the university resigned from his £270,000 job.

David Richardson stood down as vice chancellor after it emerged the black hole in the UEA's finances was far greater than initially feared.

Eastern Daily Press: Prof David Richardson, vice chancellor of the University of East Anglia

In the letter, the staff say the situation is "now out of control".

They write: "We fear that if the current chaos continues, our university will suffer irreparable harm."

They criticise the institution's leaders - "a small clique of non-academic managers" - and say that the "chaos they are creating may actively trigger rather than avert the breach of banking covenants".

They fear the proposed restructuring - involving compulsory redundancies - means that the "UEA will no longer strive for excellence in teaching or research".

According to the letter, at least two faculties are to be turned into teaching-intensive ‘cash cows’, which academics say would have a "disastrous impact" on student recruitment and could raise the risk of “full insolvency”.

They say the plans display a “shocking depth of ignorance as to our income stream”.

The turmoil at the campus was raised in parliament this week.

Eastern Daily Press: Norwich South MP Clive Lewis. Photo: Mark Tillie

Clive Lewis, the Norwich South MP, has warned about the impact on the wider region if the UEA does not recover and raised fears it was in a "death spiral".

He has called for an inquiry into what went wrong at the university, saying comparable institutions do not appear to have suffered the same crisis.

Michael Kyriacou, who chairs the UEA branch of the University and College Union, said: "I have never seen the morale this low.

"They do not think they have been appropriately informed about what has been going on at UEA and how it has reached the point that it has."

Dr Kyriacou - who is not one of the signatories - said he felt the university had been "seriously mismanaged" and described Prof Richardson's resignation as "bittersweet".

He said: "My heart goes out to anybody that loses their job, but I think he has made the right decision to resign because that's the level of accountability necessary in situations like these.

"However, we also do not have confidence in the rest of the leadership team and they have to be held equally responsible."

The university has warned that as it will need to find £45m of savings in the next three years, redundancies are inevitable - despite being the "last resort".

In a letter to staff sent last week, provost and deputy vice-chancellor Christine Bovis-Cnossen wrote: "As we have already outlined, we don't believe we can make all the savings without compulsory redundancies.

"I am truly sorry about this.

"I want to stress again, this would be our last resort after all other options have been considered."

Meanwhile, the situation is also causing anger and anxiety among the university's 14,000 students.

Emily Goodwin, 25, who is studying a masters degree in broadcast and digital journalism, said: "I think students feel a little cheated.

"We pay thousands for our degrees and the evident lack of faith in the leadership of the university makes us doubt the quality of our education.

"We just want more security."