The cash will be shared among 19 institutions, which are expected to contribute to the Government's aim of achieving economic growth by producing work-ready graduates, and increasing their transfer of knowledge from research activity.

The £1.1bn investment does not include the two additional tranches of £10m recently announced by Cabinet Secretary for Education Fiona Hyslop.

It comprises £689.8m for teaching – allowing the level of funding in this area to be maintained in real terms; £279m for research and knowledge transfer - an increase of 6.2 per cent; £31m for improvement; £14.8m for ring-fenced grants including Government funding for teacher training, social work, and dentistry; and £87.4m for capital funding to modernise estates and provide fit-for-purpose.

All institutions will receive an increase in funding, ranging from 1.3 per cent to 6.1 per cent.

Chair of the Scottish Funding Council John McClelland said: "The funding for 2008-09 sees another year on year increase with the bonus of targeted growth in student places in key areas.

"The Council recognises the priority the Government has put on knowledge transfer and I am pleased there is a significant increase in funding for this area. This will help institutions focus more on innovation and the development of links with business."

Chief executive Roger McClure added: "The increased level of capital investment is particularly welcome. It will help the universities to continue to tackle the backlog of building maintenance and provide excellent facilities for students and staff."