A survey of members carried out by the National Training Federation has found that 45% of providers have cashflow problems due to the fact that they have to rely on funding based on outcomes from government schemes. However, this is a big improvement on the previous year, when 86% of respondents reported problems.

Continuing financial problems remain due to the large amounts due to awarding bodies as students begin training schemes - providers are paying an average of £53,140, which represents some £95 million per annum to the sector, with the main cash flow problems (49%) being due to TEC fees. The Federation says that this burden is likely to grow with the emphasis upon delivering the fully accredited Key Skills Qualification in the work-based sector, and argues that awarding body costs are extremely high and may not represent value for money.

The resulting low profit margins mean that many are able to invest any substantial sums into the business, and cash flow problems and a high dependency on grants make companies vunerable to redundancies and reduced operating levels. 1.7 per cent of turnover is spent on staff training

The survey says that the resulting closure of some providers has resulted in a smaller but more financial robust provider network. Despite the problems, the remaining providers are fairly optimistic about the future. The majority of providers reported a good relationship with TECs and have a positive outlook on the incoming Learning and Skills Council.