Britain's Telegraph quoted Professor Anthony Glees, director of Brunel University's Centre for Intelligence and Security Studies, as saying that since 1995, Oxford, Cambridge, and six other universities have accepted more than £233.5 million (S$625 million) from Saudi and Muslim sources.

That amounts to the largest source of external funding for British universities and much of the money has gone to Islamic study centres.

And while the Arab donors say they are helping to promote understanding between the West and the Islamic world, the paper quotes Prof Glees' unpublished report as saying the centres are spreading anti-Western propaganda.

The report - to be published by the Centre for Social Cohesion, an offshoot of the centre-right Civitas think tank - came ahead of a conference in London yesterday, at which the government was expected to call for more university Islamic study centres.

Ministers see Islamic studies a 'strategically important subject' and last year allocated £1 million for the teaching of the subject as part of efforts to counter radicalisation.

However, Prof Glees, who sparked a row in 2005 by claiming that up to 48 universities had been infiltrated by Muslim fundamentalists, says the government is playing with fire.

The Telegraph quoted him as saying: 'The government must reconsider its far-reaching, security-driven plan to use higher education in the fight against the radicalisation of young British Muslims.

'If it proceeds, it will create the very situation the government wants to avoid: the development of self-imposed Muslim apartheid in the UK.'

He added: 'We will have two identities, two sets of allegiance and two legal and political systems.

'This must, by the government's own logic, hugely increase the risk of terrorism.'

To counter such a threat, he wants the government to ban universities from accepting money from Saudi or Islamic groups to fund Islamic studies.

He has also called for all university donations to be made public, and for a public inquiry into foreign funding.

The other universities which have taken money from Saudi royals and other Arab sources are Durham, University College London, the London School of Economics, Exeter, Dundee and City.

The Telegraph quotes Prof Glees' report as saying that, over the last five years, 70 per cent of politics lectures at the Middle Eastern Centre at St Antony's College, Oxford, were 'implacably hostile' towards the West and Israel.

Oxford has denied the allegation but Prof Glees claims British universities are so short of cash that they have no choice about accepting donations, and then risk being 'held over a barrel' by donors with extremist agendas.