Oxford says it has an annual shortfall of up to �200m

They say action is needed to keep their places among the world's elite universities.

Cambridge announced it aimed to raise �1bn in a fund-raising drive similar to those used by some US universities.

And Oxford said its annual losses were running at �200m, casting doubt on the university's ability to increase its student numbers.

Cambridge's fund-raising drive was launched by the university's vice-chancellor Professor Alison Richard.

She said the university needed to attract extra sources of funding so that it was not too reliant on any single source of income - such as government grants.

"Cambridge is one of the world's greatest universities," she said.

"Our commitment to sustain this pre-eminent position and our outstanding contribution to education, scholarship and research is reflected in our ambitious campaign target of �1bn."

Funding shortfall

"Our 800th anniversary in 2009 is a cause for great celebration. But it is also a time for reflection on the challenges we face and the opportunities that we must grasp if we are to remain a beacon of excellence internationally."

Cambridge said the money raised would be used to support students, attract the best academics from around the world and to help preserve the university's historic museums and buildings.

It aims to raise the money by 2012. Fundraising activities have already raised �300m so far.

A gradual change in our student profile... is likely over time Oxford University spokeswoman

In Oxford, the university has published its own "corporate plan", outlining the "radical and innovative measures" needed to tackle a funding shortfall.

The document - which has to be discussed and approved by the university's bodies - suggests that the annual deficit is up to �200m.

"Under these circumstances, growing student numbers whilst maintaining a commitment to the quality of the student experience would lead to unsustainable losses," it said.

"Difficult choices will have to be made about the shape (composition) of the student body."

The number of postgraduate research students is expected to rise under the plan but the question of whether undergraduate numbers should be cut is said to be left open.

A spokeswoman for Oxford said: "The corporate plan acknowledges that the university faces financial challenges, and that radical and innovative measures are needed to ensure that Oxford remains one of the top universities in the world.

"A gradual change in our student profile - with a measured increase in the numbers of taught and research postgraduate students - is likely over time.