By Mike Baker
BBC News education correspondent
The anxiously awaited university application figures are due next week.
They will show that the introduction of "top-up" fees is having an impact on the demand for university places in England.
However, soundings suggest they will be down by only a few percentage points which, after last's year spike in demand, will not yet ring alarm bells or suggest school-leavers are abandoning the idea of going to university.
This will be a great relief to the government which, with its hands full on schools policy, would not welcome a re-run of concerns over the effects of higher university fees.
Nevertheless these are anxious times for universities. While student demand is healthy at present, there is a big demographic decline looming from 2010 when the number of 18-year-olds in the population goes into a long and steady decline.
At the same time, university leaders point out that the extra income from "top-up" fees will make only a marginal difference, as much of it will go on funding student bursaries.
Despite predictions that "top-up" fees could rise to £5,000, there is no chance of the £3,000 cap being raised before the promised review of student finance in 2009.
That is why so many universities have been pinning their hopes on recruiting more international students who, providing they come from outside the EU, can be charged much higher fees.
So far this has proved to be a very lucrative business for British universities: international students are estimated to bring in about £4bn a year to British universities and some £10bn to the economy as a whole.
Numbers have been steadily rising for some years and there are now around 300,000 overseas students in the UK.
Recent predictions have suggested the global market for international students will grow fast. A recent major study, called "Vision 2020", suggested there could be a tripling of demand in the UK by that date.
On this optimistic outlook, that would mean 850,000 overseas students in the UK by 2020.
However, a conference organised by the Universities and Colleges Admissions Service (Ucas) this week suggested that this optimistic prediction could be just that - too hopeful.
The message was that the UK has been complacent and the international student market for British universities could be about to collapse.
If it does - on top of a slowing of domestic demand because of "top up" fees and demographic change - then universities face a bleak future.
We might not quite be into the territory of ghost campuses with grass growing up through deserted accommodation blocks, but there might have to be painful contraction.
The reason for the concern lies in the fact that the UK is now losing market share in the global student market. Why? The answer is simple: competition is hotting up.
Take China, for example. Last year, the number of UK student visa applications made in Beijing fell by 38%.
Applications for this year are expected to be down
At the same time, according to Dr Tim Westlake, director of international development at Manchester University, China has doubled its own undergraduate provision in the past five years.
That sort of growth makes UK university expansion look miniscule and it suggests a new policy in China of educating students at home.
Elite Chinese universities, like Tsinghua, are now - according to Dr Westlake - opening campuses in other parts of that huge country in order to compete with the best universities in the world.
Meanwhile the UK's biggest competitors in the overseas market - the USA and Australia - are both investing heavily in building their market share.
Australia's overseas student enrolment has doubled since 2000. New competition is also emerging from the Far East and the Middle East.
At present, the international student market is dominated by English-speaking countries. The global dominance of the English language has given the UK, the USA, and Australia a real competitive edge.
That is now under threat as universities in continental Europe have started to provide courses for overseas students that are taught in English.
For example, Dr Westlake cites Malaysia, which is sending medical students to Russia where they are being taught in English.
So, just as British universities have started to rely heavily on the overseas market to sustain their over-stretched budgets, it seems the bubble could be about to burst.
Overall, the number of overseas students rose by just 0.3%
A survey for Universities UK shows that four out of five universities saw enrolments of overseas students decline in 2005. This is affecting the top universities too: a survey of universities in the elite Russell Group showed 60% experienced a decline in overseas students last year.
Overall, despite many universities budgeting for a big increase in overseas student income last year, the number of overseas students rose by just 0.3%.
The irony is that this decline in the UK share of the global student market has happened in the very years when the Prime Minister has backed an initiative aimed at boosting overseas recruitment.
Some of the government's actions have not helped. Last summer the price of student visas doubled. This hardly sent a welcoming signal to foreign students.
The risk now is that universities that have had their fingers burnt in the overseas markets will either withdraw, reduce their marketing investment, or attempt to reduce the quality of courses through cost-cutting.
However, as Dr Westlake has put it, success will depend on the "brand". British universities cannot promise the sunshine and beaches of Australia or the low cost of living of the USA. So the unique selling points will have to be the quality of our degrees and the quality of the student experience.
That does not mean opening up overseas franchises or trying to accommodate overseas students on the cheap.
Providing British universities respond to the new competitive environment, overseas students will continue to be an important ingredient in British universities. But they are not going to be the financial panacea that some had hoped.
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