In 1953, the governments of the British West Indies and the United Kingdom agreed to establish a Federal Government in the West Indies. The Federal Government came into being in 1958. The University College of the West Indies played a major role in the Federation as a chief source of trained manpower, expertise, and knowledge about West Indian societies and their economies and as a symbol of West Indian hopes for regional unity. In spite of this fact, the Federal period was one of severe financial restraint for the University College.

As stated in the report of the Cato Commiteee, "The New Federal Government was to be responsible for government recurrent grants to the College. But the state of its finances for the ensuing five years was such that the Quinquennial Advisory Committee could recommend such grants for the quinquennial as permitted only very limited new academic development."

Early in 1957, the Cato Committee, headed by Dr. A.S. Cato of Barbados, was appointed by the Standing Federation Committee to review the policies of the University College. The Cato Committee emphasized the need for continued academic expansion of the College in support of the development of West Indian nations and called for annual government contributions of not less than £ 1,000,000. The Cato Committee's recommendations reassured a faculty whose confidence in the future of the College had been shaken when the Federal Government decided to cut by half its 1958-1959 allocation for the College.

The Report of the Cato Committee is available for viewing at the University Archives under Archives Accession No.MA92.1

In an effort to ease the financial strain, the Chancellor launched the Princess Alice Appeal Fund in 1955 to attract money for more scholarships, the construction of a chapel, and an Endowment Fund. Despite the difficulties, the period saw the addition of a Department of Economics, a new course in Chemical Technology, the establishment of an Education Centre within the Department of Education with financial assistance from the Carnegie Corporation, the creation of a Marine Biology Laboratory at Port Royal, the College's merger with the Imperial College of Tropical Agriculture in Trinidad, and the continued expansion, albeit slowed, of the University College's physical plant.