By Sean Coughlan BBC News Online education staff

Crewe (left) and Clarke: dialogue

These would attract international students facing tighter, post-9/11 visa restrictions in the US.

Professor Ivor Crewe, Universities UK president, said higher education had to respond to global competition.

The Education Secretary, Charles Clarke, is to unveil an international education strategy in November.

Shortage areas

He also highlighted the necessity for universities to respond to the national "strategic needs" for graduates in certain shortage subjects.

While individual universities might make their own decisions about the courses they offered, Mr Clarke said there were wider economic and social needs to be considered, so there would be a supply of graduates in subjects such as chemistry and Chinese.

Mr Clarke said he would be talking to funding councils about such priorities.

But Professor Crewe said "universities cannot in the long term afford to run departments which have very few students".

Slipping

Professor Crewe, addressing a gathering of university vice-chancellors in Oxford, said higher education in the UK was in danger of failing to respond to the international competition for students, academics and research funds.

At present, he said that the UK remained second to the United States as a force in international higher education and in attracting overseas students.

But the latest figures from the OECD showed that the UK's share of the international student market was in decline, even though actual numbers were rising.

"Just as some UK universities have become multi-national, with branches or franchise operations abroad, so foreign universities will set up in the UK, competing on our doorsteps for both UK and international students," said Professor Crewe.

"It will not be long before leading American universities establish campuses, including graduate schools, in London, especially now that US entry visas for international students have become less available in the aftermath of 9/11. The winds of global competition are blowing harder."

Income

The funding from overseas students was now a basic financial necessity which would "keep us afloat", said Professor Crewe.

Currently worth �4bn a year to the UK economy, the growth in international student numbers is expected to treble this income by 2020.

Unless the government and university sector responded to the international competition, he said that higher education in the UK faced a "spiral of decline".

Charles Clarke told the conference that accusations of a lack of emphasis on the international dimension were "fair criticism".

But he commended efforts such as Nottingham University's opening of a campus in China and the Anglo-French "University of the Transmanche".

The government is set to present its strategy for an increasingly globalised education market in November.

"Any national strategy for the long-term future of UK higher education must start with a commitment to increase international competitiveness," said Professor Crewe.

In five years, the number of non-EU international students at UK universities had risen by 60%, with this driven by increased demand from China, he said.

And he said there was expected to be demand for another 1.6 million university places in English-speaking universities in the next couple of decades, particularly from Asian countries.

But he warned that countries such as Australia and Canada would be targeting this market and the UK needed to develop a stronger international awareness.