The UK higher education sector will struggle to remain world class if the Government spends public money creating new university centres in Britain's higher education blackspots.
That is the warning from Richard Brown, chief executive of the Council for Industry and Higher Education (CIHE), as universities face a period of "severe financial strain".
"If UK higher education is to remain world class, then available government funds will have to be focused on achieving this overriding objective," Mr Brown said. "It may have to delay or even forgo initiatives such as developing new higher education centres in some towns that currently do not have higher education institutions."
The Government confirmed last month that areas in England had expressed an interest in becoming new university towns under the "University Challenge" initiative.
Speaking to Times Higher Education, Mr Brown added: "Now is not the time for initiatives that will dilute the quality of what is on offer."
The warning came in an introduction to a report compiled for the CIHE by Standard & Poor's that highlighted the fact that US universities have a more diverse income stream than their UK counterparts.
Owing to the credit crunch and demographic changes, universities are set to face tough times financially as the cost of providing education exceeds their income.
This will be exacerbated by difficulties in raising funds from alumni, a rise in academic salaries and the burden of final-salary pension schemes.
Mr Brown said the sector must continue "to pursue all income-diversification opportunities and be willing to consider options that can raise efficiency".