Cambridge has dropped to seventh place in the latest Times Higher Education rankings of the world’s best universities, released this week.

The university fell from sixth place last year, meaning it now appears five places below rival Oxford, ranked joint second, up from fourth last year, and only one spot above Imperial College London. The California Institute of Technology, which maintains a strong student exchange programme with Cambridge, came first in the new table.

The new survey raises questions over whether universities such as Cambridge can keep up with international rivals in terms of investment. Last year Cambridge’s University Council opted to apply a 2% funding cut to many academic programmes and took other steps to reduce costs, citing the “challenging economic environment” the university found itself in. The Council noted that the government’s new higher education settlement, along with the continuing adverse effects of the downturn, had created a “gloomy outlook” across universities in the UK.

The league table was released with a warning from the THE rankings editor Phil Baty that “outside the golden triangle of London, Oxford and Cambridge, England's world-class universities face a collapse into global mediocrity”. Baty pointed to the rise of Asian universities which, he said, have benefitted from “huge investment”. Despite this the UK retained its place as the second best represented country in the table with three universities in the top ten, behind the United States with seven.

The league table’s main competitor, the QS World University Rankings, gave Cambridge the number two spot in its latest survey, reflecting the different methodologies the two rankings employ. The THE table focuses on indicators showing the quality of teaching, research and number of citations a university receives, giving almost equal weighting to all three. Whereas the QS survey emphasises academic peer review scores. This controversial measure involves collating the responses of tens of thousands of academics on the calibre of universities worldwide, and makes up 40% of an institution’s final score in the QS rankings.

The university need not fret too much however as just yesterday it was reported that international investment ratings agency Moody’s awarded Cambridge a much sought-after AAA rating, describing the university’s market position as “outstanding”.