The report, , has been published a week after the chancellor of the exchequer announced that the Department for Business, Innovation and Skills would have its budget for this year reduced by a further ?450 million.

The study says that ÖйúAƬ institutions¡¯ ability to invest for the long term and to remain resilient in the face of international competition relies on a funding system that ¡°ensures financial stability and predictability¡±.

Universities¡¯ autonomy must also be protected, to allow them to ¡°respond quickly to challenges as they arise¡±, while the sector¡¯s diversity is also important, the report says, to enable institutions to play to their strengths and cater to local needs.

The report, which was published on 11 June, highlights the ?73 billion of economic output that was generated by UK universities during 2011-12.

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It quotes government estimates that indicate that a 1 per cent increase in the share of the workforce with a university degree raises the level of long-term productivity by between 0.2 and 0.5 per cent, and argues that ÖйúAƬ institutions can also help to attract talent to an area through innovation and investment.

In addition, the report says that universities are increasingly collaborating with employers to develop ¡°innovative pathways¡± to higher-level skills.

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A survey carried out by the ÖйúAƬ Statistics Agency, detailed in the report, says that 108 of 161 ÖйúAƬ institutions questioned offered continuous work-based learning. Some 150 offered bespoke courses for businesses and, when asked to place on a scale of one to five the extent to which employers were involved in curriculum development, 113 out of 161 institutions rated this as four.

Dame Julia Goodfellow, chair of UUK¡¯s submission to the 2015 spending review and the association¡¯s next president, said universities ¡°are a fundamental part of the UK economy and play a key role in ensuring that the UK remains globally competitive¡±.

¡°The UK must ensure that the higher level skills required in the labour market are met and our universities have an important role to play in meeting this demand, both through their more traditional model of three-year undergraduate university study, and by developing other routes to higher skills,¡± said Dame Julia, the vice-chancellor of the University of Kent.

¡°Universities are a globally recognised source of innovation and research and, in turn, attract direct foreign investment. They generate knowledge and discovery that can boost both the private and the public sectors.¡±

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?chris.havergal@tesglobal.com