Britain's universities are becoming increasingly dependent on overseas students, according to the Organisation for Economic Co-operation and Development.

With 13.4 per cent of students from abroad, UK campuses are the second most internationalised among OECD countries, beaten only by Australia (16.6 per cent). Both are well ahead of the OECD average of 6.5 per cent.

In 2004, 33 per cent of students completing masters courses in the UK and almost 37 per cent of PhDs were from abroad. The UK was outranked only by Australia for masters courses (39 per cent of output) and by Switzerland for doctorates (41 per cent).

Masters graduates from overseas did not exceed a fifth in any other country for which the OECD collected data in 2004.

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The findings suggest that international students are sufficiently convinced of the perceived quality and status of courses offered by British universities to pay tuition fees that are above the OECD average.

The OECD points out that UK fees for students from outside the European Union are very high - at $18,000 (?9,600) in purchasing power parity terms, compared with $12,000 in the US, $11,000 in Australia and $8,000 in Canada.

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Yet the international market remains volatile, as demonstrated by the decline in the UK's share of students. The UK's share of an expanding market fell by 1 per cent between 2000 and 2004; but with 11 per cent of all internationally mobile students enrolled, the UK is still an attractive destination - second only to the US. The US saw its share of the market fall from 25 per cent to 22 per cent over the same period.

The market has been growing dramatically, from 600,000 enrolments worldwide in 1975 to 1.9 million in 2000 and 2.7 million in 2004. The largest increases in market share were in Australia, France, Japan and New Zealand.

Outside the EU, the UK's main sources of international students are China (15.9 per cent), India (4 per cent) and the US (4.5 per cent). The proportion of students from Asia rose from 40.8 per cent of total intake to 46.9 per cent in a year.

Where they went

Distribution of foreign students by country of destination 2004

Australia - 6%

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Canada - 5%

France - 9%

Germany - 10%

Other non-OECD - 15%

Other OECD - 22%

UK - 11%

United States - 22%