Britain is fast slipping down a world league table showing the percentage of young people opting to go to university.
The UK has slipped from second in terms of the percentage of people getting degree passes in 2000 to eighth. It has also fallen from 10th in terms of overall participation to 14th.
The slide comes despite Tony Blair's declared aim of widening participation among working class students - and declaring a target of getting 50 per cent into higher education by the end of the decade. It places a question mark over the UK's ability to be competitive in the world market in years to come.
The Organisation for Economic Co-operation and Development (OECD), which conducted the survey, warned that the slide down the world league table would continue. Andreas Schleicher, head of analysis, said the UK was not producing enough youngsters with good enough qualifications to go on to A-levels and higher education.
"This may be the most critical concern in terms of getting people into universities," he said.
The study shows class sizes in UK primary schools are among the largest in the Western world despite more investment.
The OECD report made it clear that the UK was still increasing the proportion going to university - it was just that other countries were increasing at a faster rate. Participation increased by 20 per cent between 1995 and 2003 - compared with an average rise of 38 per cent.
The UK was well below Australia, the Czech Republic, Greece, Hungary, Ireland, Korea, Mexico, Poland, Portugal, Slovakia and Sweden, whose figures rose between 33 per cent and 169 per cent over the same period.
Mr Schleicher said most of the these countries had a strong vocational strand of education - along the lines recommended by the inquiry into 14 to 19 education by the former chief schools inspector Sir Mike Tomlinson but rejected by Mr Blair.
The Prime Minister had been worried before the last election that replacing A-levels and GCSE with an overarching diploma covering both academic and vocational qualifications would be seized on by the Conservatives as evidence he was scrapping the "gold standard" of education.
The report also warned that another factor "may be that the array of public subsidies for tertiary study in other countries may be better geared to encourage participation". Most concentrated on help for living costs - which was axed by Labour in 1997. However, it was conceded that the new arrangement for a restoration of grants to coincide with the introduction of top-up fees could rectify this.
The report praised the UK for its sustained increase in spending. It now spends a larger percentage of its GDP on education (6.1 per cent) than the average OECD country (5.9 per cent) for the first time.