Universities and lecturers must accept their role as training providers for industry or see UK businesses look to overseas institutions for the graduate employees they require, employers' leader Digby Jones warned this week.
Mr Jones, director-general of the Confederation of British Industry, told The THES that academics should have regular secondments to and meetings with industry so they could better understand what employers require.
He said: "The world has changed - higher education, just like anything else, has gone global. So, a major multinational company can say 'well, if I am no longer in a tax competitive environment, I will move to another country.' Another thing they can say is 'if we are not able to work with a university and develop a course for us and if we do not get good-quality people, we will go and do it in another country'.
"So, the provision of quality graduates is as important a reason for a business to invest in Britain and Northern Ireland, and not somewhere else, as anything else.
"I am not too sure Britain's got that on board. I am not too sure that we see universities as being as important in the fiercely competitive global economy as labour markets and tax."
Mr Jones, who spoke to The THES in the wake of last week's CBI survey on higher education and business, said that initiatives such as secondments for lecturers would begin to address higher education's "ignorance and inertia" towards business.
Mr Jones said that greater business involvement in university course development was necessary to encourage businesses to invest more in higher education, which in turn would help them improve the quality of courses in a mutually beneficial cycle.
He said that there were many examples of good university-business links across the country but that the overall picture was patchy. Good initiatives often relied on a handful of forward-thinking people in individual higher education institutions and companies, he said.
He praised the government's knowledge exchanges scheme, 20 of which will be set up to reward universities' links with business. He also welcomed the government's extension of vocationally oriented foundation degrees and modern apprenticeships, saying they were incremental to three-year honours courses, not substitutes.