Private companies that gain the power to award their own degrees will join a "pond full of piranhas" and may be better off working with established universities to provide recognised courses, according to the chief executive of the Quality Assurance Agency.
Peter Williams, whose agency determines which organisations should have degree-awarding powers, said students could be turned off by the prospect of a certificate from a small private company, rather than an established university.
Currently most private providers of higher education offer courses awarded by established universities under accreditation partnerships, but the 2005 Higher Education Act allows private bodies to apply for their own degree-awarding powers.
Speaking last week at a conference held by the Association of Independent Higher Education Providers, Mr Williams said: "It can be argued that students coming to the UK would prefer to have a qualification at the end of it that has the certificate of a well-known UK university rather than a less well-known UK private provider.
"That is something that I think is actually rather important. Where does the advantage lie: in having your own name up in lights, or that of a better known institution?
"That, I suppose, is a matter of ambition and - although I won't say hubris - of self-confidence.
"As a relatively small provider, you would be a little fish in the big pond of UK higher education, which, as those who have been active in it will know, is a pond full of piranhas."
Mr Williams told conference delegates that there were numerous advantages to having degree-awarding status, which two private institutions in Britain - the profit-making BPP College and not-for-profit College of Law - now have.
But he cautioned against the view that it was "a licence to print money" across the world. He said: "The experiences of the regular public higher education sector in the UK suggest that overseas activities are extremely expensive."