The overall income of the higher education sector has soared in the past decade, but average surpluses generated by universities are lower than some would like.

The findings are made in a report by Universities UK, released this week, on sector trends between 1997-98 and 2006-07.

The study found: sector income rose more than 50 per cent in the past five years; that last year half of that income came from funding council teaching and research grants and from tuition fees from domestic and European Union students; and that the largest increase in income is from international students, who have more than doubled in number in ten years.

Geoffrey Crossick, chair of the UUK longer-term strategy group, said income streams had diversified as universities sought to reduce their dependence on the state.

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But he added: "Across the sector, a median surplus of 2.3 per cent ... is well below the 3 to 5 per cent judged the minimum necessary to allow investment for sustainability."

In his address to the UUK conference, Rick Trainor, its president, said "sustainable and predictable" funding was required to secure the sector's future as "world class".

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He cautioned: "Our gross domestic product spend on higher education of 1.3 per cent still falls below most of our major competitors. Similarly, investment in research and development in the UK is not only below the EU average but also well below that of the United States.

"In this future landscape there must be a sustained commitment to increasing investment both for infrastructure and for running costs ... Above all, we look to the UK Government, and indeed the devolved governments, as the key funder of the university system, for a commitment to maintain the level of public investment in undergraduate teaching, so that additional fee income really does mean additional resources to support teaching and learning."

john.gill@tsleducation.com.