By Mike Baker
BBC education correspondent
As many as 240,000 extra university places could be needed to meet the growing demand for higher education by 2010, an independent think tank says.
Universities will have to expand as more students qualify for entry
The demand for new places - equivalent to 16 universities - would be driven by the rising number of 18 to 20-year-olds and improving A-level results, it says.
The Higher Education Policy Institute (Hepi) also believes more EU students will want to attend UK universities.
Hepi said funding had to be improved or universities would struggle to cope.
Competition for places
Hepi says the increased demand will result from the combination of a rising number of 18 to 20-year-olds in the population and recent improvements in the numbers achieving two A-levels.
Further demand for places will come from the students in the 10 new EU countries who now have the right to be treated in the same way as UK students.
Hepi director Bahram Bekhradnia has warned that unless the government funds sufficient expansion to meet this increased demand "there could be a position, unique in the past 40 years, where there are not university places for everyone qualified to go".
He said that, unless the current rate of funding improved, "competition for places will intensify and there will be more and more disappointed students".
Hepi's report is an update of predictions it made a year ago. It says the rising number of 18-year-olds alone will account for an increased demand for almost 120,000 undergraduate places by 2010-11.
On top of that it predicts a further demand for between 30,000 to 100,000 places as a result of recent improvements in the number of school-leavers attaining two A-levels.
Finally, improved access for students from the newly-arrived EU countries would account for a further 12,000 to 19,000 undergraduate places.
Its report, Higher Education Supply and Demand to 210 - an Update, says the predicted demand is in line with the government's target for 50% of young people to have some experience of university.
However, although universities are currently expanding at a fast enough rate to meet this demand, Mr Bekhradnia says universities are not being funded for this level of growth.
He said despite overall growth of some 40,000 places last year, less than half of these were funded by the government.
A spokesman for the Higher Education Funding Council said the government was funding an additional 20,000 Foundation Degree, undergraduate, and post-graduate places for 2004-05.
The Department for Education and Skills responded to the report by saying it revealed a choice - either to expand universities to meet growing demand or to "place a cap on people's ambitions and contract".
"This government is determined to increase higher education opportunities," said a spokesperson.
"The spending review settlement will allow investment in the sector to continue to grow in real terms and will enable the government to make progress with expansion."
"It is worth remembering that funding per student has gone up for the first time in over a decade under this government and the introduction of variable fees will also provide additional resources for universities," said the DfES spokesperson.