Places at established universities could be cut to accommodate the government's plan to open up higher education to more private provision, it has been suggested.

The "doomsday scenario" was highlighted as one potential consequence of allowing students at private colleges full access to loans, as proposed by the Browne Review.

At a Universities UK event in London last week, David Willetts, the universities and science minister, said competition from new private providers would help to prevent universities from overcharging their students if proposals for higher fees were passed.

However, questions are being asked about how feasible it is for student places to be expanded in light of the loan system's costs.

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Sir Alan Langlands, chief executive of the Higher Education Funding Council for England, said it was "clear" that total places would still have to be controlled due to the costs of student support.

Speaking at the Hefce annual meeting in London, he added that the government still wanted to find a way to allow numbers to fluctuate between institutions, but said that private providers were an "added complication".

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Paul Marshall, head of the 1994 Group of smaller research-intensive universities, was due to say on 2 December that this was a quandary facing the government.

"It is assumed that part of the quid pro quo of an attempt to balance supply and demand will be that private providers will be provided access to the newly enhanced student-support arrangements," he was expected to say at the Private Provision in UK Higher Education conference in London.

"However, the financing of such a significant expansion of an extremely expensive and generous student-support package simply doesn't add up. There is little or zero headroom to expand student numbers.

"Indeed, one doomsday scenario put to me is that if the government pushes ahead with expanding access for the student-support arrangements to private providers, it cannot afford to do this without reducing the numbers of students accessing student support at the traditional universities."

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For-profit providers such as BPP, a subsidiary of the US-based Apollo Group, are keen to sign up to arrangements allowing more students access to loans. Growth is even more vital after Apollo recently wrote off $170 million (?109 million) from BPP's value in the wake of the economic downturn.

An internal BPP email seen by Times Higher Education shows that in 2009-10 the company recorded falling revenues for the first time in its history. The memo - sent to staff by chief executive Carl Lygo earlier this year - reveals that 90 BPP employees had been made redundant and pay had been frozen.

BPP may face further cuts after Apollo said it intended to "aggressively manage" its costs in light of a tough US market affected by media criticism of for-profits' student-recruitment methods.

simon.baker@tsleducation.com.