Private training providers are dismissing staff and cutting courses amid growing fears that their Train to Gain funding next year will not cover demand from employers.
Providers say they are being kept in the dark regarding the amount of funding they will receive from the Learning and Skills Council for 2009- 10, so they are having to take action now to ensure their continued financial viability.
They are doubly frustrated because the LSC had encouraged providers to increase their Train to Gain activities following early signs that the scheme was proving unpopular with employers and it needed providers to sell courses.
Chris Jeffrey, managing director of the Academy of Training, based in Plymouth, said she had been forced to lay off two members of staff. The company was about Pounds 4 million short of what it needed to meet its targets for next year.
"It is potentially crippling," she said. "I am making arrangements to go speak to directors of companies to explain that we cannot support them in the way they had hoped.
"We have not finished fighting for more money, but at the moment it is an absolutely critical situation."
Graham Hoyle, chief executive of the Association of Learning Providers, said: "Unfortunately Chris's story is commonplace among members, who are turning away employers and trainees.
"We were asked to get as much business as we could, and the Government said they would sort out the money later. Well, it is later, and there's no sign of the money, even though at the highest levels there is agreement the money is there.
"Providers are cutting back on pre-agreed activity. But if the money is there, then we will be in a position of trying to reinject funding where we have turned away trainees and employers. There is a real reputational issue here, not just for private providers but for further education as a whole."
A spokesperson for the LSC said the indications were that demand for Train to Gain would continue to grow, which was encouraging, particularly in a recession.
"This performance is a testament to the sector's ability to respond flexibly to demand, and providers should be congratulated for their efforts to raise volume and quality.
"However, left unchecked, Train to Gain and 25-plus apprenticeship activity will exceed the budget allocations we have available in the 2009- 10 financial year and create further pressures in future years.
"The LSC will take action now to agree with colleges and training providers contracts that enable growth in Train to Gain and apprenticeships to continue but within the levels of investment we have available. The LSC is working closely and quickly to ensure we can continue to maintain and where appropriate expand these programmes on a sustainable basis."
Letter, page 7.