Universities are losing their ivory-tower image, transformed by what one Cambridge University administrator calls "a new breed of academic". Vice chancellors are now regarded as high-flying chief executives, rewarded with business-class pay packets and perks - though golden handshakes are frowned on and there are no share options.

Professors, like Steven Ley (page 6), fluent in the language of commerce, are becoming adept at striking deals with industry. Further down the academic hierarchy, lecturers increasingly earn extra income as consultants and some are lured to the City by the soaring salaries.

Such steps towards business could, however, pale into insignificance as United Kingdom universities turn to the money markets for capital which is no longer available from the public purse. Where in the 1960s the avant-garde architects of new campuses were commissioned on public money, now everything from halls of residence to high-tech laboratories and multimedia libraries will need private money, begged or borrowed.

Begging will not go far. Fund-raisers know the difficulty of raising donations for buildings. Individuals rich enough are rare and companies - while spending Pounds 300 million plus on research, teaching and scholarships - are seldom willing to pay for university infrastucture.

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Universities were first enticed into the private money markets by the Business Expansion Scheme, which allowed them to raise capital by offering individual investors tax efficient packages. But that scheme ended in 1993 and soon the pay-outs will begin to fall due, putting strain on budgets originally planned on an assumption of expansion.

Now universities are breaking new ground. Lancaster has launched a debenture issue to raise Pounds 35 million. Nottingham Trent's law school is all set to raise Pounds 1 million on the equity capital markets. Birmingham, the University of Central England and Aston have joined forces to establish a quoted investment trust to provide Pounds 10 million. And a Pounds 100 million bond scheme, based on Andrew Bain's Private Sector Funding in Higher Education and backed by the Committee of Vice Chancellors and Principals and the Higher Education Funding Council, is on the slipway (see page 3).

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These initiatives may be only the harbingers of a major change in universities' financial position. Later this month, private finance initiative conferences in London and Scotland, co-sponsored by the CVCP, HEFCE and the Department for Education, will explore projects which go beyond the bond scheme model, beyond the notion of the City as a mere lender, and which involve the real transfer of risk from the private to the public sector.

There is no reason why these projects should not succeed. Universities represent a sound investment for merchant banks. They do not trade in luxury goods. Demand for education is set to increase. Their financial health is closely monitored. Perhaps most of all, they are long-term businesses.

For universities the financial advantages are obvious: big sums with manageable interest rates, a diversity of funding sources and escape from government control. But they will need a long spoon. The money markets are about money not philanthropy as ING's cautious approach to the long-term future of the Baring Foundation demonstates. Indeed the Barings crash might serve as a timely warning as the oldest merchant bank turns into a crumbling foundation. This in not a game for amateurs. Universities which aim to play in this market will need more not fewer of those much resented senior managers on envy-inducing salaries.