Private schools have been warned to prepare for amalgamations, downsizing and even closures as declining birth rates hit the sector.
They will need to be more successful in selling themselves and poaching pupils away from state schools if they are to survive in a shrinking marketplace, said an education finance expert.
The stark warning comes in the wake of figures from the Independent Schools Council showing a 0.6 per cent drop in privately educated children after ten years of growth.
State schools have already been alerted to the shifting demographic trend. Education chiefs in Birmingham plan to cut a tenth of current primary places by the end of the decade following a 14 per cent fall in the city's birthrate between 1991 and 2002.
Henry Briggs, senior partner at Birmingham accountants Haines Watts - whose clients include a number of private schools in the area - said "major strategic decisions" had to be taken by the private sector.
"The only way is for individual schools to look carefully at their own marketplace and the trends within it," he said.
"The options they face may be limited. With the overall market apparently shrinking, schools need to consider whether to reduce their size, try to become more competitive or seek to expand, perhaps by appealing to parents previously unable to afford private school fees."
Mr Briggs, whose Edgbaston-based firm was a key sponsor of the Independent Schools Bursars' Association Conference in Torquay earlier this month, added: "It is quite probable there will be some consolidation in the market."
Latest figures from the Independent Schools Council (ISC) reveal the total numbers attending private schools is already down by 3,250 pupils this year, from 504,830 in 2004.
The ISC admitted the downward trend was a concern and future rationalisation was possible.
But spokesman Dick Davidson said: "The signs are that the independent sector holds up pretty well against the demographic downturns. The reason for that is they are very good at marketing themselves. They live in the marketplace and only exist if they can convince parents to spend what is often very significant amounts of money on them."
Mr Davidson added: "Some of the weaker schools have either closed or amalgamated. The ones left tend to be larger and more secure."
But John Claughton, headmaster at Solihull School, warned declining birthrates coupled with a downturn in the economy could prove fatal for many private institutions.
He said: "Schools like ours have to invest to get good results and have excellent facilities because it is a very competitive market."
Elaine Brook, head of feepaying Priory School in Edgbaston, agreed private schools needed to work harder to convince parents to send their children to them.
"Changing demographics certainly is an issue for all heads at all schools," she said.
"We are more proactive at getting our name out than we were. It is survival of the best."