Is the latest finding from the Association of Graduate Recruiters -- which shows that while the pool of graduates has grown, a fifth of leading employers report a shortfall in graduate recruitment -- the harbinger of an unwelcome trend or a statistical blip? Either way, it is enough to make final-year students nervous and is a sharp reminder that the worlds of the executive and the academic are still far apart.

Some employers are complaining that while graduate numbers have risen (and they want the figure to continue increasing to 40 per cent of young people by 2000) they have not seen a commensurate increase in graduate "quality". In part, the complaint is about "academic" quality, a surprising observation given the supposed improvement in university entrance standards as measured by A-level grade. Several professional associations have recommended that entrance to degree courses in their fields should be conditional upon at least three grade Cs at A level.

But primarily, the complaint is about the failure of the modern graduate to demonstrate a range of what business now calls "basic", "personal transferable" or "core" skills. These are chiefly business awareness and communications skills. Other skills in short supply include leadership, ability to work in a team, and problem-solving. The causes of these perceived deficiencies are manifold, and cannot be laid exclusively at the door of universities.

It is certain that the economic pressure to get a good degree, plus the time devoted to raising cash to pay for it, mean that fewer undergraduates are spending their curtailed leisure time on activities that involve the natural development of these skills: for instance, organising social events (business acumen), speaking in debating chambers (communication ability) and playing sports (leadership and teamwork). Equally, it is clear that business priorities have changed. While demand for graduates this year is expected to rise by more than 10 per cent, employers will be looking for people who can become, with minimum fuss and minimum financial commitment, "one of us". This is a fundamental change from the era when employers sponsored two- or three-year graduate traineeships. Recent evidence has shown that graduate retention of the 1991 intake was as low as 43 per cent.

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So if the universities are not producing graduates of sufficient "quality" for companies to employ them, what is to be done? One answer is the development of vocational degree programmes. Businesses have already expressed a preference for this type of course by paying over the odds for students with vocational experience. The latest AGR statistics reveal that sandwich-degree graduates often receive a starting salary supplement of Pounds 300 a year, Pounds 50 more than the supplement paid to first-class degree students. Employers have also begun to set up their own vocationally-oriented courses -- notably Ford, Sainsbury's and Coca-Cola and Schweppes Beverages (page 5).

But there is a danger of going too far down the road of vocational degrees. Taken to extremes, universities could become glorified training establishments, turning out a bunch of philistines pursuing pay packets, promotion and pensions. Life is more important than that, and so surely is university? It is an irony not lost on the students of today that the business-led changes to universities have been effected by people who themselves enjoyed three years to "find themselves". Howard Gardner is one leading educationist who contends that the creative mind develops during periods of extra-curricula activity (page 17).

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An alternative is the development of professional graduate schools. There is no great demand for students who study subjects "for their own sake", not least because this means they are further distanced from the job market. But certainly employers cherish postgraduates, especially in specialist fields. Graduates with PhDs can expect supplements of more than Pounds 2,000, and those with MAs or MScs often receive Pounds 500. Employers are not viewing these higher degrees as evidence so much of academic ability as of greater vocational skill.

It is regrettable that the doors of graduate study (and therefore employment) are closed to many domestic students by lack of funding. Multi- and highly-skilled students cannot be achieved in three years. The establishment of US-style, high-profile, professional graduate schools, funded by government and busines, would be a significant step towards resolving the problem, meeting employer demand, and providing a fast-track environment in which core and technical skills can flourish.