Nearly one-third of learning providers - including private training companies, colleges and employers - "fall short of the required standard", according to the Adult Learning Inspectorate.
The inspectorate looked at all government-funded training for 16 to 25-year-olds, much of it consisting of modern apprenticeships. The ALI report, which was based on 231 inspections of training in the engineering, manufacturing and technology sector, reports that some of the worst offenders are further education colleges.
The inspectorate reported that 39 per cent of work-based engineering training in colleges is "unsatisfactory".
Barry Lewis, an inspection manager with the ALI, said: "Given the importance of engineering, manufacturing and technology skills to our economy, it is disquieting that nearly a third of learning provision as a whole is less than satisfactory."
He said that too many learning providers were unable to invest in the type of up-to-date equipment which apprentices need to get familiar with if they are to be valued in the workplace.
The report found that colleges that were satisfactory or better were those which had good links with industry, and where trainees had solid hands-on experience.
Martin Temple, director general of the Engineering Employers Federation, said: "The value of employer involvement in training is clearly demonstrated in the findings of the report.
"Getting close to employers is key to the success of training delivery, and this kind of demand-led provision will help our sector to achieve its full potential."
Phil Hall, quality director for Monarch Airlines, said the issue is funding, with companies ever-fearful that their trainees will be poached and struggling to justify costs when the economic conditions are wrong. He told FE Focus: "We would say that those who don't do the training should pay a levy. We are effectively paying a levy by spending the money we do on training people.
"We in aviation have a reputation in the UK which is among the best in the world. One of the reasons we don't have the same problems as other engineering sectors is we are heavily regulated and set ourselves high standards."
Aviation has experienced a downturn in the wake of the September 11 attacks on the World Trade Centre. This, he hopes, is a relatively short-term problem but the longer-term decline of other engineering sectors will continue to make it harder for employers to continue without government funding, he argues.
He said: "We have about 10 people this year but next year we are not taking anyone. We are taking a year out because of the downturn."