The rationale underpinning UK higher education (HE) has changed significantly over the last 20 years. Government policy dictates that 50% of 18-30 year-olds should be in HE by the year 2010. Students enter HE almost solely for the exchange value of the qualification and the expectation of enhanced career prospects in business and industry. This paper argues that UK HE is not responding to the drivers for change demanded by the key stakeholders and as a result advances in business and industry are compromised by the inadequacies of graduates. The current HE system has evolved steadily into its current form, but in the last two decades there have been radical changes in the demands of stakeholders. These changes were identified by Sporn at the European level as: "three major challenges: expansion, diversification, and massification". Higher education systems have not been sufficiently reactive to these step changes. The paper sets out a current view of HE based on evidence collected through participant observation and data from key stakeholders. It highlights deficiencies in HE which impact adversely on business and industry and have been created by inherited structures. Some of these proposed deficiencies have been identified as the funding of HE, the tension between research and teaching, the separation of vocational and non-vocational disciplines, the radical advances in ICT, the demands of key stakeholders and the inability to foster creativity and innovation in the curriculum. The author offers a discussion framework to initiate a discourse on how best HE can meet the needs of business and industry more effectively over the next twenty years.