The UK’s largest provider of adult training and apprenticeships has been branded inadequate in a damning inspection by the education watchdog Ofsted, which it then went to court to try to suppress.

Learndirect, which has almost 73,000 trainees on its apprenticeships and training programmes, went to the high court to try to quash the report in which it is said to have been awarded the lowest possible grades.

However, its application for a judicial review to overturn the report was refused in a judgment on Friday and Ofsted confirmed the as-yet unpublished report would be released on Thursday.

According to reports in the trade newspaper FE Week, which was in court, Learndirect – the UK’s largest vocational training provider – was awarded grade fours for its apprenticeships and outcomes for learners.



Among the criticisms was that “management of apprentices is ineffective”, while about a third of learners on apprenticeships “do not receive their entitlement to off-the-job learning” and fail to develop “the skills they require to progress to the next step in their career”, the paper reports.

Details of the case emerged when the court lifted reporting restrictions on Monday after refusing Learndirect permission to appeal.

Responding to the court judgment, Learndirect said it had challenged Ofsted’s inspection because it did not believe the process was a true reflection of the company’s training quality and performance. “The business presented compelling evidence as part of the appeal to support this view,” a spokesperson said.

“In particular, we felt that the sample size of 0.6% used by Ofsted to arrive at its conclusions is not sufficient to judge the quality of Learndirect’s training. We are therefore extremely disappointed with the verdict.”

Ofsted defended its inspection. A spokesperson said: “Seventeen inspectors took part in this inspection over four days when they spoke to learners and apprentices.



“Inspectors interviewed employers, apprentices and learners in person and over the phone, reviewed portfolios of work, and looked at progress reviews when they gathered evidence.

“As well as visiting apprentices in their workplace, inspectors also reviewed a wide range of evidence to ensure that both the judgments and inspection grades were secure.”

Court documents passed to the Guardian by FE Week, which worked on a joint investigation with the Financial Times, show Learndirect was concerned about the potentially damaging effect of the inspection report on its business, which is largely dependent on government funding.

Earlier this year it was reported that Learndirect, which has 1,645 employees, was consulting on redundancy plans that could affect up to one in 10 of its staff. Learndirect’s spokesperson said on Monday that the company’s underlying business remained stable and it would continue to focus on its learners.

He added: “The business’s recent financial performance has been significantly impacted by external factors, in particular successive central government funding cuts which have reduced our revenues by £100m over the last three years. Significant cuts have affected all providers in the sector.

“We have responded to these difficult market conditions by changing our operating model and diversifying our income, and we have remained competitive throughout this period.”

Accounts filed with Companies House show that the finances of Learndirect and its associated companies – ultimately owned by Lloyds Banking Group – have deteriorated in recent years.



Learndirect’s profit after tax dwindled from £10m in 2012 to just £1.6m in the year to July 2015, the most recent period for which figures are available, despite revenues surging from £134m to £171m.



At the same time, Learndirect’s parent companies, Pimco (Holdings) and Pimco 2909 paid out tens of millions of pounds in management fees, dividends and interest payments.



Pimco 2909’s outgoings in 2012 include the £500,000 sponsorship of the Marussia Formula One motor-racing team, chaired by Darryl Eales, who was a Pimco 2909 board member and former chief executive of LDC. LDC is the private equity arm of Lloyds and is the ultimate owner of Pimco (Holdings) and Pimco 2909.



Learndirect was launched by the government as a charity and taken private by LDC in 2011. At that point it had no borrowings but the group of companies is now heavily laden with debt.

The group had nearly £96m of debts due for repayment after one year, including £44m to Lloyds Development Capital. That compares to £85m of assets, of which £71m is marked as “goodwill” – essentially notional value rather than tangible assets.