Great Britain must improve on its record gold-medal haul at the Beijing Games and create a world-class sports system that delivers success beyond 2012, the Government's funding agency for elite athletes said yesterday.

As the curtain comes down on the best Olympic performance by a British team for a century, the demands are already being made on sports administrators to cut dead wood and focus on genuine medal contenders at the London Games.

“We only get one shot at a home Games so we must build on the success,” John Steele, chief executive of UK Sport, said. “We should be looking at an increased number of medals. No one would want to go into a home Games and stand still.” His words were backed up by Sir Clive Woodward, elite performance director of the BOA, who said that rival countries such as Australia and Russia were already plotting their revenge. “The rest of the world will redouble its efforts when they see what we have done,” Woodward said. “A lot of countries really don't like losing to the British.”

If Britain staves off the advancing threat of Russia to finish third in the medals table, this could create something of an unexpected conundrum. Olympic chiefs thought that they could finish in eighth place at these Games and were targeting fourth place in London.

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How to appear to be bettering Beijing presents a serious challenge, particularly with China and the United States so far ahead in first and second. But it is indicative of Britain's new-found winning mentality and ruthless approach to sport that this is not holding back thinking at UK Sport. It has to make some tough funding decisions in the coming months as it works out where best to allocate the £400million pot - assuming the full commitment is forthcoming from the Government. Even if there is a shortfall, failure will not be rewarded.

“We will go into a darkened room and review our ambitions. What that means as far as the medals table goes is another matter,” Steele said. “It's not just about throwing money at it. For every pound of investment we want performance in return.” The message is clear to underperforming sports such as athletics: fail to present a compelling business case for increased investment and expect cuts.

“There is a set resource. That could mean increases in some areas and decreases in others,” Steele said. “If that means diverting investment and putting it in other sports where it is better served, we will do it.” UK Sport also revealed that it would be carrying out annual performance reviews for the first time rather than granting money to individual sports for an entire Olympic cycle.

Funding decisions will be made on results but also the potential of talent and whether the right coaching and administrative structures are in place. The infighting among the hierarchy of amateur boxing, which has become public during these Olympics, could lead to a funding review.

The example of best practice is cycling, which failed to hit its medals target in Athens, but was granted more money because it was on track to reach the heights of success seen in Beijing.

Liz Nicholl, UK Sport's director of performance, said that athletics could follow cycling's example by funding fewer athletes for London. “The most effective way to create a world-class programme is to concentrate on a smaller group of athletes,” she said.

“Fundamentally, it is about selecting the right ones, those that have potential for 2012 and not 2009.” While Team GB's results at the Olympics have been a cause for celebration, Woodward said that the country could not afford to be complacent. Improving from a position of strength is one of his key tenets, with the RFU's refusal to match his pace of change in rugby the reason he resigned after victory in the World Cup in 2003.

“I saw it for myself in rugby after we won the World Cup. Some people at the Union got drunk on success. When you are successful, people think it will go on for ever, they think it has come easily. They question whether fresh resources are needed.

“It is a scary time if you are trying to drive things forward. There are a lot of good things going on aside from the Formula One sports like cycling, rowing and sailing, but we need to keep improving.

“Walking around the athletes' village, you can already see the Australians and the Russians plotting how they are going to fight back. If you are not careful, you can get caught very, very quickly.”

Historically Britain's performance has dipped after the initial euphoria of the gold medals has subsided. Hockey and ice skating are the textbook examples. “That just cannot happen here,” Steele said. “We cannot do anything that will jeopardise the next four, eight or 12 years. We have an opportunity to create a system that is world class so that when the Rebecca Adlingtons of this world are retiring as multiple Olympic champions, their successors are already in the world-class environment to deliver sustained success.”