Newly published international rankings show that British universities have lost ground on those in the United States and emerging Asian economies
The table, based on the academic reputation of universities across the world, only places Oxford and Cambridge in the top 10.
Five other British universities, Imperial College London, University College London, London School of Economics, Edinburgh and Manchester, are in the top 50.
But the table, published by Times Higher Education magazine, shows that other big names have lost ground, with greater polarisation between a small band of elite British institutions and the rest.
Phil Baty, editor of the Times Higher Education rankings, said: "Outside the golden triangle of London, Oxford and Cambridge, England's world-class universities face a collapse into global mediocrity."
The reputation of UK universities overseas is important to the economy because international students spend more than £5bn each year through tuition fees and off-campus expenditure. Many UK universities are heavily dependent on overseas students. But with new strict visa procedure and less opportunity to work, British universities are losing students.
Figures obtained by The Guardian newspaper from seven prestigious US institutions show that hundreds more British students are following in the footsteps of the Harry Potter star Emma Watson to further their education at elite US universities.
The primary target appears to be Harvard, which has received 500 applications from UK students for undergraduate courses this autumn, a jump of more than a third on last year. British enrolments at Yale and Princeton, have doubled in five years.
Recent budget cuts in the education sector by the British government has led to an increase in tuition fees by British universities.
It is reported that the combined spending of the three top US universities alone is more than Britain’s entire defence budget.