Perhaps Universities are at a point of divergence. DS' University talks a lot about its international standing. It is also the University where UK Government funding forms the lowest proportion of its overal funding. And somewhere with one of the highest proportions of overseas students.
Way back, when I did my degree, I was the only British student on my course, so mixing with overseas students was pretty normal but as you suggest, the really hard working students kept to themselves or we kept away from them. Now the proportion of overseas and non-UK EU students seems to have grown, as has the number of first generation British students who to some extent socialise on an ethnic rather than nationality lines. All a rather clunky way of saying that working long hours seems to be the norm, and that British (or indeed students from elsewere) who are engaged in their course, and perhaps less interested in an athletics/SU/student bar centres of gravity, may find themselves naturally gravitating to mixed and quite hard working groups. London schools are so international that DC emerge with far less sense of a difference between the British and "foreigners", and presumably the same applies to students growing up elsewhere in the world. So students mix better and the prevailing work culture seems to have shifted.
I'm not sure I have a strong view, as it is up to DS. However after three years of public exam grind I can see some advantage in him taking his foot off the pedal this year.
I dont really understand why academics across the whole world feel standards are slipping, but don't know enough to comment. However from what I have witnessed in terms of the London part of the Ivy League application hurdle race, it is not a system designed to pick up the most interesting or academic. Plenty of mini-renaissance children who are coached, tutored or trained to the nth degree so that they shine at art, sport, music and more. Up to three years practicing for SATs, and then several attempts, hands up first for any school leadership position, and and and. This is obviousy not true of all, however from observation the very bright, ie those that find A2 Further Maths a breeze, seem to have opted for the more specialized UG degrees found in the UK.
I am a bit surprised to hear that Imperial's physics is slipping, though really would not know. For economics Durham was not really on the radar. The top four are fairly well defined. Bristol's habit of giving out contexturalised offers was a bit off-putting, even if the reasons behind are understood. If you get an A* in further maths and know they may be letting some students in with an A in single, or perhaps even a B, there is a fear that much of the first year will be spent covering old ground. We know some really good students who ended up at UCL or Imperial for Engineering, and the grades required for Computer Science were really tough. And from observation, competition for overseas student places at Cambridge in quantitative subjects seemed really tough, with a lot again going to Imperial.
Another anecdote. I have two lovely, and rich, Chinese students as tenants in a rental property. They took a well established route of Concord/Cardiff sixth forms, maths at Imperial followed by a Masters. They giggled when I told them that DS had started at LSE, had taken Further Maths A2, and was now spending the greater part of his time studying maths. They claimed not to have realised Caucasians were capable of understanding maths. Presumably in all their years of study they had come across very few. It is also very obvious that after six years in the UK and they had barely touched the sides culturally, or indeed liguistically. Still they are spending a fortune in London shops, and are subsidising home student's University fees.