The Australian universities' main foreign student recruitment agency is to close its UK offices amid a slump in overseas applications to study in Australia and a sharp reduction in international student market share.

IDP Education Australia is to lay off staff and close six of its bases abroad as a forecasted profit of A$2.5 million (?1 million) turned into a loss of more than A$2 million.

Australian universities have enjoyed more than a decade of rapidly increasing enrolment of foreign students. Their fees contribute more than A$1.5 billion a year to university budgets.

But a 10 per cent drop in enrolment growth this year caused alarm and threatens IDP's future.

ÁñÁ«ÊÓƵ

The company employs 800 staff in its 100 offices, including 160 in Australia. This number will be reduced as it tries to rein in expenses.

Office closures began last month when IDP shut down its operations in the US and sacked all its staff in Washington.

ÁñÁ«ÊÓƵ

As increasing numbers of foreign students use the internet or approach universities directly about enrolling, IDP has seen its market share steadily fall.

IDP had an 11 per cent share of the growing Chinese market last year but it dropped to 9 per cent this year. Recruitment from Malaysia, Indonesia and Hong Kong has also suffered.

Senior staff say poor management has resulted in low morale and that ten general managers have resigned in the past 12 months.

A meeting of vice-chancellors in Sydney last week discussed what action could be taken. One rejected option was for IDP to become a global recruiter of international students, which would mean attracting students for countries that compete with Australia.

ÁñÁ«ÊÓƵ

"It's terrible to see a good organisation going down the drain," said a former IDP staff member who did not want to be named. "With the downturn in recruiting in most of IDP's traditional markets, the whole way it operates will have to fundamentally change if it is to survive."

A recent global study by IDP of the comparative costs of higher education among the main English-speaking nations that recruit foreign students found that Australia was second only to Britain in its high cost of living.

Australia will have to work harder to capitalise on the global demand for international education, particularly from Asia, a report of the study warns.

It says foreign students are now "more savvy" thanks to the wide range of information available from different sources, including agents, exhibitions, the internet and governments promoting international education.

ÁñÁ«ÊÓƵ

"This implies that students will look for a wider range of options than in the past," the report says. "Some of these options will be the possibility of studying in Asia, where good quality education and good employment outcomes at an affordable cost are offered."

Lindy Hyam, IDP chief executive, said that the conjunction of a high Australian dollar, rising living costs, increased university course fees and the expansion of competing countries into Australia's markets was unprecedented. She said: "Everything's changed. We can't operate the way we have in the past."

ÁñÁ«ÊÓƵ

She said consultants Deloitte were developing a new structure for the company that would go to next month's board meeting.