“But they’re such fierce competition for university places they can’t afford to drop a stitch, can they?” (BBC Radio Drama, The Archers)
(1) What does the highlighted part mean? (2) Is university places in UK a kind of entrance exam?
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“University places” refers not to an exam, but instead to openings or positions for students. Prestigious universities typically have several times as many applicants as they have places for. The general idea is that a single mistake might knock someone out of the running.