Universities that do not fundamentally review their activities during the prevailing economic crisis "will not exist in the future", according to one of the UK's most senior funding chiefs.

Steve Eagan, deputy chief executive of the Higher Education Funding Council for England, told an international conference in Denmark that institutions around the world were going to have to "cope with less public money".

He said that universities must say what they are "really good at, and ask what are the things that don't really matter" if they are to have any chance of survival.

"These are very important questions: are we really a research- intensive institution? What should be our research spread?" Mr Eagan said.

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"In a time of plenty, such questions can be avoided. But those who don't ask the questions will not exist in the future. It is a time of strategic choices."

Mr Eagan's warning coincided with the revelation on the Times Higher Education website that there are seven names on Hefce's list of higher education institutions deemed to be "at higher risk" in financial terms.

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The current list comprises four post-1992 universities and three specialist colleges. One of the at-risk institutions has been featured on the list since October 1998.

Times Higher Education has not named the institutions, following advice from the Information Commissioner's Office that it would not be in the public interest to do so.

At the conference at Copenhagen Business School, which was arranged by the Organisation for Economic Co-operation and Development (OECD), delegates heard a bleak forecast for education spending.

Sven Blondal, head of the organisation's macroeconomic policy division, said that the OECD's 30 member countries were in the midst of the "deepest postwar recession" they have ever faced, and that many would suffer severe budget deficits in 2010.

He predicted that the UK would have to cope with the worst debt of all, adding that with pressure on the public purse compounded by the burden of an ageing population, all spending would face serious scrutiny and investment in education was at risk.

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In a debate after the presentation, Mr Eagan said that UK vice-chancellors were worried about the scale of the cuts they may face.

"Some say 5 per cent or 10 per cent, others say: 'I can think of a bigger number.' There is that kind of feeling, and expectations shape behaviour," he said.

Asked whether universities should be allowed to go bankrupt if they fail in today's much tougher market, Mr Eagan said: "Whenever an institution in our country faces difficulties... there will always be a profound effect on the local economy. There will always be the argument that we can't let this precious asset go.

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"But when institutions fail, what do you do? How do you get them to change what they are doing? What powers do you use?"

He added that although Hefce would involve itself in institutions' survival strategies, the funding council would have to be convinced that they could survive before any strategy was approved.

phil.baty@tsleducation.com

Forewarned is forearmed

As the recession bites, awareness of its potential effects could mean the difference between death and survival.

Predictions about how the downturn could affect universities by Dirk Van Damme, head of the Centre for Education, Research and Innovation at the Organisation for Economic Co-operation and Development, include:

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• Private sources of income will fall with "sometimes spectacular" drops in endowment income and donations
• Tuition fees will hit a price ceiling, making hikes impossible
• Research contracts with industry will decrease
• Investment plans will be hit by continuing credit restrictions
• Institutions that successfully diversify their income sources may be hit by public funding cuts as they will be categorised "as not needing public support". This could make them easy targets for retrenchment
• Demand for higher education will increase, but some institutions will be forced to limit their student intake.