A devastating inspection report could have destroyed the company, but within 15 months Shape Accredited Training Centre had turned its nine grade 5s into grade 3s, taking it from the bottom grade to average.

“It was like World War Three,” says John Redhead, chief executive of the Cleveland Youth Association, which runs Shape. “We were threatened by Tees Valley Training and Enterprise Council with losing our contract.”

Loss of the TEC contract would have had a devastating effect on the young people training with Shape for trades ranging from construction and business administration to retailing and public service work. TECs were the local bodies that contracted with learning providers before the introduction of the Learning and Skills Council.

Shape had more than 50 staff working with 320 young people when the Training Standards Council delivered its damning report in February 2000.

Newly-appointed Mr Redhead, whose background was in banking, launched an emergency action plan.

“It was about restructuring the company,” he said. “We had to prepare ourselves better for inspection and then hit the inspectors up front with everything we had achieved over the past 15 months.”

Shape was re-inspected by the Adult Learning Inspectorate in July 2001. It reported “significant” improvements in company policies and communication, clarity of job roles and staff meetings, sharing of good practice, individual training plans for each member of staff, partnerships within the community and comprehensive policies and procedures for equal opportunities.

As well as a self-assessment process, the company had also focused on the trainees’ individual needs. “The key has to be the first step, which is the initial assessment,” said Mr Redhead. “If we do see shortcomings, then we put in the support so they will want to be with us.”

But despite all Shape’s efforts, retention and achievement rates were still poor. The ALI acknowledged the company’s difficult circumstances. The report described Middlesbrough as the “worst district in the country” for the concentration of deprivation, with unemployment in parts of the Tees Valley running at 20 per cent.

Work placements were hard to find, but ALI criticised the quality of some, commenting that these employers “do not understand national vocational qualifications” or “the contribution they can make to assessment practices”.

Half of Shape’s learners came from deprived areas, 72 per cent had additional learning needs or other barriers to education and employment. Difficult clients were often referred to them because of their expertise in this field.

Some made progress but came from homes with little commitment to work or training, others left because they had been offered a job or switched training courses - but all were counted as “failures”, he said. “You get nothing for getting them part of the way.”

Shape got a lot of help from Tees Valley TEC for their emergency action plan, but training providers fear that LSC contracts will be driven by short term, value-for money-judgments, based on government retention and achievement targets. “We are still feeling very vulnerable,” said Mr Redhead.