The British Design & Art Direction Student Awards could provide the winner with a ticket to a coveted design job and could help an institution gain recognition, reports Helen Hague.

It's a very glitzy bash. Against a backdrop of ambient music, buzzy young creatives mingle with movers and shakers from design and advertising, sipping champagne and networking furiously.

They'd be mad not to. The venue is the Commonwealth Institute in London, the event the British Design & Art Direction Student Awards, and the young creatives, not yet out of college, are waiting to hear if they have won a prize - in the shape of a small, stubby yellow pencil - that could help smooth their way to a highly coveted job.

Careers in design, advertising, new media, consultancy and packaging beckon for the winners. The 28 awards, sponsored by businesses such as Corus and Haagen-Dazs, have such cachet because they arise from briefs set and judged by industry insiders for an educational charity designed to foster creative talent throughout careers. The initiative is a template for the sort of education-business partnership the government is so keen on: lecturers learn from industry what is needed to equip undergraduates for work, the skills gaps that need filling and how courses can be honed to meet changing industry needs.

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New-media and digital design are growth areas. This year, the Italian company Tiscali set a brief for streaming on web media - asking students to come up with a "movie stream intro on the theme of interaction". There were also the more traditional briefs for poster, press and TV ad campaigns and direct mail and product design.

However, amid the backslapping bonhomie, leading designer Dick Powell introduced a chilly note. He told the assembled audience: "Our design education system, once a model for the rest of the world, has been gutted by successive governments who mistakenly believe that you can nurture creative talent in the same way you teach history or English literature."

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Though now "decimated and poorly supported, it is held together by the passion and commitment of a reducing number of dedicated teachers and lecturers, who are spread ever-more thinly across the rising regiment of student numbers".

David Kester, D&AD's chief executive, agrees. "There is a sense in the industry that the creative education system has become too much of a sausage machine, with the emphasis on per capita funding and driving up numbers."

Zelda Malan is a visiting lecturer at Central St Martins College of Art and Design who also teaches at Buckinghamshire Chilterns University College. Before switching to teaching in the mid-1990s, she worked in advertising, finishing with 12 years at Saatchi & Saatchi.

She has an impressive record: students she teaches from both colleges again picked up little yellow pencils this year. "There won't have been anyone in the audience who disagreed with the way Dick Powell summed up the state of art education. Teaching ratios have been cut and student intake increased," she says. "Tutors have to work ten times harder to maintain the same results. I spend a lot of time getting visiting lecturers for nothing, getting godfathers to help my students - every trick I can play to use the industry to help me."

Bucks Chiltern - which offers a vocational advertising course geared to industry needs - has carved a niche for itself and continues to pick up little yellow pencils by the handful. "We have a reputation for getting people jobs and loads of industry contacts," Malan says. "But last year, there were cuts across the board. We get results but less funding. The government has to understand that you will get great design students and thinkers only if you put the money in."

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Corus sponsors three briefs a year to promote the use of stainless steel in packaging. The overall winner of the Corus awards gets ?2,000 and a two-week placement with leading design agency Jones Knowles Ritchie. Last year's winner, Frazer Reynolds, won with a design for a credit card-shaped metal spot cream container before graduating in industrial design from Napier University. He was on the payroll within three months.

Paul Porral, head of global design at The Body Shop, set the brief for a stainless steel package for accessories, make-up or fragrance, chiming with the company's brand values of simple, recyclable materials. The overall winner "was just the cleverest and simplest idea", Porral says - a steel container, which can be squashed and recycled, with a re-usable plastic nozzle. "The plastic Body Shop bottle has almost became an iconic shape for eco-chic brand," he says. Porral was sceptical about using steel at first, but he now thinks he could take the design further.

That the award went to a Swiss confirms a growing trend for foreign winners in the annual student competition. The D&AD recognises that global brands now trade in global markets. Porral - a "European" Brit who comes from Gibraltar and studied in Madrid - was not surprised.

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"I keep employing more and more people who come from a European background - including English designers who have worked abroad. There's a lot of home-grown talent, but we are complacent. Not the tutors - the tutors will tell you about the pressures they are under. Not the D&AD. But the country is complacent. Just look at the English football team. It's taken 20 years to get back to where it is now."

For students, the awards can help them get ahead. It can help set them apart from the stiff competition, which includes about 15,000 graduates each year and many of last year's graduates who are still seeking jobs.

For tutors and lecturers, the awards bring kudos to the college. They may not get a yellow pencil, but they do get a certificate that can help build an institution's research profile.

Geoff Thomas-Shaw, who has taught 14 previous winners at Salford, now runs the design communication course at Chelsea School of Art and Design, part of the London Institute. One of his students picked up a commendation this time round. In the most recent research assessment exercise, the institute jumped from a rating of three to five. And the yellow pencil winners from Chelsea and St Martins could well have helped nudge up the score.

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