Many of Aaron Associates' 6,000 students have been affected by major reductions in its contract to provide healthcare courses and they fear more cuts will follow, forcing it to abandon 25 years of expertise.
Training providers across the country face the axe as the Learning and Skills Council ruled only 5 per cent of students in any college could be covered by franchise arrangements.
Labour MP John Mann raised the issue in parliament last month. "Training providers are extremely important. Their services are being cut while no steps are taken to ensure that high-quality training is maintained."
Colin Walker, Aaron managing director, said: "We used to receive all LSC funding through just one college, but limits meant we had to start working with other colleges to maintain our numbers.
"In one contract student numbers were slashed from 5,000 to 2,400. Unless things are changed we'll have to move into different sectors."
The company provides carers with the qualifications demanded as a minimum standard in their jobs, Mr Walker said. "Colleges aren't running all required courses. If someone who takes home pound;100 a week has to take a pound;40 specialist course elsewhere, just to keep their job, this hits them very hard."
Graham Hoyle, head of the Association of Learning Providers, said: "Smaller providers are not affected, but Aaron's experience is typical of larger providers. They have to move into different sectors resulting in loss of expertise, particularly in healthcare."
This has created concerns about the limit's impact on care standards and patient health. Aaron's course in infection-control training, essential in containing hospital infections, including the MRSA superbug, is one under threat, and there are fears for courses in the care of vulnerable adults, food hygiene and the manual handling of adults in care. The ALP says the postcode lottery resulting from haphazard implementation of the limit also provokes hostility.
Mr Walker said: "Inconsistencies between areas mean I can accept a learner with an LN postcode, but then have to turn away learners living two streets from them because they have a PE postcode which comes under different LSC funding arrangements."
But the LSC insists the rules are not rigid. Rob Wye, director for the council's chief executive division, said: "The 5 per cent budgetary guide is not a limit or a cap. It's designed to inform the planning process of the LSC.
"We recognise there are many examples of good practice in franchising.
Where significant levels of valuable provision are delivered, the LSC is exploring ways this activity might be directly supported in the future."
However, Mr Hoyle said: "The intent behind the guidelines is irrelevant.
The fact is they have been interpreted as caps and limits by local LSCs and it was obvious that this would happen."
There were no alternative funds available and this was creating a training void, he said.