The uk is is set to fall behind in the international race for skills and economic competitiveness, despite hundreds of millions of pounds invested in recent years.
The annual report of the UK Commission for Employment and Skills (UKCES) on progression towards the Government ambition of "world-class skills" found that although the UK was making progress, competitors were moving faster.
On current trends, based on data from 2007, the UK is heading for rankings of 20th out of 30 for low-level skills, 21st for intermediate skills and 11th for high-level skills by 2020 - below world-class (defined as the top quartile) in every category and lower than the position today.
Chris Humphries, UKCES chief executive, said: "At the moment, our economy is still world-class - quite an achievement for such a small island. But we're living on past glories.
"Economic success rests on three legs - skills, jobs and productivity - and we are well below average on the first of these. Unless swift and decisive action is taken, we can expect the UK's economy to begin to slide down the international rankings.
"The commission hopes and believes that the UK can continue to be a world- class nation, with some of the best skilled workers and the best businesses.
"But at the moment, just like the England World Cup team, while aspiring to still be in the quarter-finals in 2020, our current performance just enables us to scrape in at the bottom of the last 16."
The UK is on course to exceed its domestic target for 40 per cent of the workforce to have qualifications at level 4 or above. But the numbers with A-level equivalents, or level 3, are predicted to fall short by nine percentage points from a target of 28 per cent, prompting fears of a gap in intermediate skills.
The commission recommends improved information and advice, particularly by publishing data on student destinations and earnings for all publicly funded colleges and universities.
It also wants to see more funding and decision-making devolved to the front line, as well as public investment targeted on basic and lower-level skills, leaving employers and individuals to pay a greater share of the cost of higher-level training.
Employers' organisation the CBI, however, has rejected suggestions that industry is contributing too little, saying that its members pay for what they need, despite contributing less than public sector employers for a larger part of the workforce.
The report also questions whether the UK is pursuing the right skills mix and whether employers are equipped to make best use of the high-level skills the country is producing in unprecedented volumes.
Mike Campbell, director of research and policy at the commission, said: "The supply of highly skilled people in the UK is growing seven times faster than the demand for them - that's unsustainable."
But the commission suggested that there need not be a choice between paying for training and cutting the deficit, if skills were used effectively to increase productivity.
Larry Hirst, chairman of IBM in Europe, the Middle East and Africa and one of the UKCES commissioners, said that improving skills could wipe out budget deficit. The commission said just a 1 per cent increase in productivity would be equivalent to eliminating the structural deficit within the life of this parliament.