Universities that fail to focus on their strengths will come under increasing financial pressure to merge, forge "strategic alliances" or even close, a Russell Group registrar has warned.
Jonathan Nicholls, registrar of Birmingham University, predicted a trend of increasing "stratification" of higher education in the next five years, with institutions focusing more specifically on either teaching or research, or seeking a "niche" in the market.
The warning came in a paper about university finance given by Dr Nicholls at a recent conference of engineering professors.
He said that 12 institutions were being monitored monthly by funding council chiefs and gave a hint of the scale of the financial problems some face:
* A £120 million institution that forecast it would break even, but that developed a £4 million deficit in one month
* An £80 million institution that forecast it would run out of cash in nine months
* A £30 million institution, where internal auditors are "whistleblowing on ineffective governance"
* A £40 million institution, with a redevelopment plan costing £140 million and debts of £50 million
* An £8 million institution with a redevelopment plan costing £47 million and a funding gap of more than £8 million
* A £120 million institution with a deficit of £6 million "to be recovered from overseas student growth but no other strategy".
Dr Nicholls told The Times Higher : "The sector is going to shake up over the next few years, there's no doubt about it. It's not just tuition fees, it's about full economic costing, public funding and the pay framework and a series of other pressures.
"For universities that are well prepared, this will be a time of great opportunity. But none of us should imagine there isn't going to be great volatility as well."
Dr Nicholls said he expected the higher education market to "rapidly differentiate" after the first year of variable tuition fees.
He added: "If you look from the perspective of the individual student or member of staff caught up in closures or mergers, no doubt it would be distressing. But we need a clearer sense of stratification in higher education. It's about institutions being clear about what they offer and what they do best.
"They can't all think they will be world-class research universities, because they won't. It's about valuing universities and the different missions they each have."