The vice-chancellor of Cambridge University has called for funding for UK postgraduates to be improved as "a matter of urgency".
In her annual address at the start of the new academic year, Alison Richard warned that declining numbers of British students were applying for Cambridge doctoral degrees, with "dramatic shrinkage" in some fields.
She said this must be addressed not only for the future prosperity of the country, but to ensure a strong future generation of UK academics.
She said: "For graduate students, the potential transformation of Cambridge to a fully international university could be much closer if the decline continues in the number of British students studying for doctoral degrees, with dramatic shrinkage in certain fields.
"We must improve funding for UK postgraduate students as a matter of urgency, and we must also work to improve the rewards and career prospects for those who choose postgraduate study.
"It is undoubtedly important for the long-term economic health of this country."
Professor Richard said that the university should be a magnet for the very best home students, as well as attracting talented young people from other countries.
As the future of tuition fees, bursaries and government support for teaching are considered, Cambridge must remain alert "to the danger of unintended consequences" driving UK undergraduate numbers down.
*Any future increase in undergraduate fees should aim to sharpen competition between universities and recognise that the "costs of quality" vary between a diverse range of institutions, the vice-chancellor of Oxford University said in his annual oration.
John Hood also described Oxford's finances as "severely stretched", and said the university was budgeting for a small financial loss for 2007-08. However, the total value of new research contracts signed had grown by 45 per cent over the past year to £387 million.