More than half of UK PhD students quit academia for industry as soon as they get their qualifications, according to the first-ever detailed report on the early careers of those with doctorates.
While the report will quash fears that PhD students are so specialised as to be unemployable, it will raise concerns about the future supply of academics.
The report, What Do PhDs Do? , from the UK GRAD programme, found that about 60 per cent of UK PhDs in physical, engineering and biomedical sciences leave academia, compared with about 30 to 35 per cent of arts, humanities, social science and economic PhDs.
The report says that over time these proportions increase as, for example, PhDs on short-term postdoctoral positions move into other employment sectors.
Report author Ellen Pearce said: "The figures will raise serious issues about how universities retain PhD students and sustain the teaching base of UK universities."
The report, which analyses what UK rather than overseas PhD students do, found the students to be highly employable. Nearly three-quarters got jobs - in or outside academia - six months after graduating.
This compared with 69 per cent of masters students and 61 per cent of undergraduates. UK PhDs are about 50 per cent less likely to be unemployed (3.2 per cent) than first-degree graduates (6.6 per cent).
"It is hard to say whether this is brain drain or brain circulation," Ms Pearce said.
The report also found that the percentage of female PhD graduates had increased from 40 per cent in 1999 to 46 per cent in 2003. In all, 12,520 research students were awarded PhDs in 2003. Between 1999 and 2003, there was a 31 per cent rise in the number of PhD students registering for their final year.
"We interviewed employers from different sectors and found them to be highly enthusiastic about PhD students," said Ms Pearce. "Their response puts all the emphasis on transferable skills into perspective. It is clear that PhD students have a high value in the market."
Stephen Court, senior research officer for the Association of University Teachers, said there had been a sharp decline in the number of young entrants to academia coming from the UK.
"It is not surprising that a high proportion of people with PhDs do not choose a career in higher education," he said.
"Universities are finding that the prospect of fixed-term contracts and the low pay they offer are extremely unattractive to potential academics."
In 2002, Sir Gareth Roberts' report SET for Success put in motion a major programme of transferable skills training for PhD students.
Morgan Kavanagh, a director at recruitment consultants Huxley Finance, said: "We recruit for clients who require high-level quantative skills, so we look only at PhDs - first-degree graduates simply can't compete.
"PhDs are much more sophisticated in their thinking and have a broader toolkit of skills to draw on in the demanding roles we place them in."
The general manager in a private engineering firm said: "We've found that PhD graduates have a combination of maturity and autonomy that is more useful for our work than engineering graduates with a similar length of experience in industry."
Jocelyn Prudence, chief executive of the Universities Colleges and Employers Association, said: "Higher education recognises that recruitment and retention of academics is a vital area and for that reason the framework agreement on pay modernisation addresses work-life balance, career development and renumeration. These have been shown to be the most important issues people consider when making decisions about their working life. The framework will deliver on all three. Real progress is already being made to offer postgraduates an academic career that is both attractive and fulfilling."
The UK GRAD report shows that 38 per cent of PhDs are in the biosciences, 33 per cent in the physical sciences (including engineering), 14 per cent in the arts and humanities, and 11 per cent in the social sciences. Some 4 per cent of PhDs were doing theses in other areas such as education.