Cambridge and Oxford are the second best universities in the world according to the latest rankings, and British universities are closing the gap with those in the United States.

Oxford and Cambridge share the number two spot with Yale, with Harvard ranked number one in the latest league tables from The Times Higher Education Supplement.

The findings will bring cheer to the higher education sector in Britain at a time of growing concern among vice-chancellors and employers that British universities will lose students to better-financed institutions abroad and that business will then follow them with jobs and investment.

They are also likely to add to pressure from vice-chancellors for a rise in the £3,000 annual tuition fee cap at British universities to ensure that they have sufficient funding to compete on the world stage effectively John Hood, the vice-chancellor of Oxford, said that the success of the university in the rankings – Oxford had moved up – had been achieved “despite the fact that its resources are considerably more limited than its international counterparts, particularly in the US”.

Wendy Piatt, the director-general of the Russell Group of elite research-led universities, said: “We recognise that our universities must continue to rise to the challenges of increasing global competition and increasing investment by other countries in their universities if we are to retain our status as truly world-class institutions.”

Professor Rick Trainor, the president of Universities UK, representing vice-chancellors, added: “Our competitors are increasingly marketing themselves more aggressively so it is vital that the UK remains among the foremost destinations for international students and staff.”

Britain now has four universities rated among the top ten in the list of the best 100, according to the rankings.

University College London rose from 25th position last year to ninth in the table, entering the top ten for the first time and rising farther than any other major institution. Imperial College, London also improved its standing this year, rising from ninth place to fifth.

Harvard, whose endowment of $35 billion (£16.6 billion) is roughly equal to the combined annual funding for all English universities, tops the table, but its lead over its closest rivals has fallen from 3.2 to 2.4 points. Nunzio Quacquarelli, the managing director of QS, the careers and education group that compiled the rankings, said: “In an environment of increasing student mobility, the UK is putting itself forward as a top choice for students worldwide.

“They are taking a closer look at the quality of faculty, international diversity and, of course, to the education they will receive.”

The rankings are based on a survey of academics and companies employing graduates, international student and staff numbers and research citations. The factors were weighted and transformed into a scale giving the top university 100 points and ranking the others as a proportion of that score.

The presence of so many American and British universities at the top of the rankings reflects the dominance of English as the world language for academic publishing.

Top class

1 Harvard University US
2 University of Cambridge UK
2 University of Oxford UK
2 Yale University US
5 Imperial College, London UK
6 Princeton University US
7 California Institute of Technology (Caltech) US
7 University of Chicago US
9 University College London (UCL) UK
10 Massachusetts Institute of Technology (MIT) US

Explore Education

• Schools

• A Level & GCSE Results

• Good University Guide

• Sunday Times University Guide

• Student

Times recommends

• 8-minute lessons boost pupils' GCSE grades
• Intensive tuition proves cure for illiteracy
• The new laws of student unrest