I graduated last June with a 1st, MSci in Chemistry. At the moment I'm having a year out for medical reasons. I have applied for a PhD last October. Prior to this I did a summer placement, with the same supervisor, the funding being provided on the basis that I ''seriously consider that department for a future PhD''....so far I'm still waiting to hear if I can get funding...I would like to hear yes or no, so that i can make other plans if need be. This is very frustrating.
I think your problem is very similar to the ones faced by students who get stuck with irresponsible supervisors.My advise to you would be to ask that supervisor (sternly)whether or not he/she is ready to provide you with funds.There are several of us stuck with such dillydallying supervisors who expect us to wait forever for their green signal.You can refer to the "supervisor's responsibility and E mail" topic on the PhD forum.
Funding for PhD studentships can be a minefield. If your supervisor does not have a specific studentship from one of the research councils he/she may be looking for funding from alternative sources (such as from departmental funds, a research charity or from an industrial colaboration). You should find out from him/her when he is likely to know if money is available and the chances of getting it. There is no reason why they should not explain the situation to you fully and frankly if they are asking you not to apply anywhere else. You should let them know that you'd like to begin looking elsewhere as a safety-net (you can always turn other offers down).
With a 1st in Chemistry you should have litle problem finding a place somewhere. But competition in any subject is fierce when it comes to working in established labs with the top people in the field. Getting funding is as much about the supervisor and the research project proposed as it is about the strength of the candidate.
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