Hundreds of students have occupied a second building at Sussex University as part of an escalating dispute over the privatisation of campus services.

More than 200 people took over a lecture theatre in the medical school in a bitter dispute that is now entering its third week.

In May the university announced it was to sell off some campus services, meaning 235 workers will be transferred to private companies from August.

The move provoked an angry backlash from some students and staff, 50 of whom occupied a conference centre on the top floor of a university building at the beginning of February.

On Thursday a spokesman for the campaign said there were now 60 or 70 staff and students involved in the occupation at any one time with hundreds more regularly turning up for "flash demos".

One campaigner, Michael, said: "This thing is definitely growing – every day I look around there are more students and more staff involved."

He said campaigners were concerned not just about the outsourcing of specific services but the wider "commodification of education" at the university.

The university said: "The sit-in is led by a small group of students who are opposed to private sector activity in general. Our students' union, which represent students on campus, have made clear today that they are not organising or leading any occupation action on campus."

The students' union said it supported all peaceful protest, including occupation, although it said the occupation of teaching spaces could cause disruption. "While the students' union is supporting the occupations on campus, we are not leading or organising them."

• This article was amended on 1 March 2013 to clarify the student union's position in relation to the occupation.