A flagship Government apprenticeship scheme designed to train thousands of teenagers is battling with colleges for the best-qualified young people.

A new report on the Modern Apprenticeship highlights how the scheme has led to competition between participating employers and neighbouring colleges, as well as with other training programmes.

The findings are a cause for “major concern”, according to the report authors, Incomes Data Services.

The conclusions will raise serious doubts over whether the Government’s target of 30,000 apprentices by the end of this academic year is achievable. Only around 4,000 schemes were runnning by last September.

If ministers’ long-term target of 150,000 apprenticeships underway at any one time is to be reached, further education colleges could find themselves losing out on students.

The report is also likely to prompt criticism that well-qualified young people are being “super-served” with education and training opportunities, while their less academically-successful counterparts miss out. The minimum qualification level for a modern apprentice is usually three or four good GCSEs, or equivalent - a level which filters out thousands of school leavers annually.

The publication of the study coincides with predictions in a separate survey carried out by a south London training and enterprise council (Solotec) that mass youth unemployment in the capital is now a “real danger” because of lack of training.

Young people will bear the brunt an expected collapse in employment because the manual and unskilled jobs they traditionally hold are being taken by part-timers and married women returning to work or are vanishing through industrial or technological change, the Solotec study says.

The TEC’s chief executive, John Howell, called for urgent action to counter 16 and 17-year-old’s vulnerability to unemployment. He said “substantial investment in training and work experience” was needed to help young people make the transition to the world of work.

The skills gap highlighted in the Solotec survey was pointed up again this week by Sir Geoffrey Holland. The former permanent secretary at the employment and education departments told the North of England Conference that Britain was lagging further and further behind its international competitors. The workforce had slipped to 24th place in the world in terms of skills, he said as he called for a “national crusade” to raise achievement.

The Modern Apprenticeship - now in its first full year after a pilot launch in 1994-5 - was designed to help close Britain’s skills gap, creating a pool of well-trained young employees to meet the needs of industry.

Under the scheme, employers receive cash via TECs to train 16 and 17-year-olds to level 3 national vocational qualification standard - a higher skill level than under existing schemes such as Youth Training. So far 54 industry sectors have developed apprenticeship frameworks.

While the new IDS study shows the majority of employers involved in the scheme are positive about their experience - a fact seized on by ministers anxious to spur on the return of the feel-good factor - the Government still faces the problem of attracting new employers.

A study published by Ernst Young in November found that participating employers were mainly from industries with a history of apprenticeship such as engineering and construction.

James Paice, the junior education and employment minister insisted that the balance will correct itself.