OXFORD and Cambridge may automatically spring to mind when we think "top universities", but they've both been pipped to top position in the world for the fifth year in a row by an American university.

Harvard, the Ivy League institution which has topped the table of world university rankings yet again, demands fees of £18,622 a year, while fees in England and Northern Ireland are capped at £3,145.

Another top US university, Yale, is rated as second-best, relegating Cambridge to third place and Oxford to fourth. Last year the three shared second place.

The 2008 Times Higher Education-QS World University Rankings show that 22 of the 29 British universities that feature in the global top 200 have slipped down the ladder in the last year.

Imperial College in London slid from fifth to sixth, overtaken by the California Institute of Technology. Only one UK university, University College London, improved its position, from ninth to seventh.

The list aims to give a view of the relative strengths of universities based on criteria that include academic peer review, staff/student ratio and research performance.

Of the top 10 institutions in the world, six are American and four are in the UK. Looking at the top 20, US dominance is more apparent, with 13 universities featuring in amongst the four British, one Canadian, one Japanese and one Australian.

As with most statistics, various arguments can be constructed around them, depending on who is grinding which axe.

British vice-chancellors say more Government funding is needed to maintain our place in the top-tier of centres of excellence for higher education, research and innovation.

Education ministers might – and do – say we're performing marvellously and punching well above our weight. American would-be students could conclude that a top UK university is a good value alternative to what's on offer at home, even factoring in the cost of accommodation and maintenance. Comparing fees, Oxford demands 50 per cent less than Harvard, and the 19th- ranked University of Tokyo's fees are 85 per cent below the American university's.

Wendy Piatt, director general of the Russell Group of the UK's top 20 research universities, said: "We are pleased that Russell Group universities continue to perform well against our major global competitors.

"However we are very concerned about our ability to sustain this level of success in the face of fierce global competition. The table reflects the growing strength of our global competitors – particularly the US institutions – who benefit from much higher levels of investment than UK universities.

"In terms of GDP, the US invests over twice as much as the UK on higher education, and their major research-intensive universities are amongst the largest beneficiaries. For example, the endowment fund of the University of Harvard alone is greater than the total public funding for all universities in England in any given year."

Increased competition isn't coming only from the US. Huge investment in higher education and science in China in recent years means that it is climbing league tables and will soon overtake the UK in terms
of research publications, says Dr Piatt.

India, the Middle East, Brazil and Australia are also challenging us, as are France and Germany.

Based on OECD data, the UK's annual expenditure on HE is lower than most other OECD countries, as a proportion of GDP, expenditure per student and as a proportion of total educational spending.

"Without increased investment there is a real danger that the UK's success will not be sustained," said Dr Piatt.

Funding that's below levels enjoyed by our competitor countries, threats to freeze salaries in higher education and the high levels of casualisation of staff in UK higher education are serious risks to the future reputation of UK universities, says Sally Hunt, general secretary of the University and Colleges Union (UCU).

"That so much is delivered with less funding makes the achievements of our universities and, in particular their staff, all the more impressive.

"However, higher education is still blighted by casualisation and recent employer threats of a pay freeze do nothing to motivate these hardworking staff. The slight drop in the rankings this year must serve as a warning that unless the funding is found to address these problems, then the UK's position as a global leader in higher education is at risk."

Commenting on the World Rankings, Minister of State for Higher Education David Lammy said having four universities in the global top ten is "further evidence" that our higher education system is world class.

"But we are not complacent. Excellence today is no guarantee of excellence in 10 to 15 years time.

"Higher education is more important to the future of our country than ever before, which is why by 2011 we will have increased funding by 30 per cent since 1997, spending £11bn a year."

Of universities from this region featured in the World Top 200, Sheffield is ranked at 76, York at 81 and Leeds at 104.