In a statement the Department for Education confirmed it would withdraw funding worth £158m by July 2018 because of Ofsted’s report, which branded the company's services "inadequate".
The publication of the judgement - which gives the lowest possible rating - was delayed as Learndirect had asked the high court to suppress it, saying that it was “unrepresentative” because of the small sample size used by Ofsted inspectors.
A spokesperson for the provider, which employees 1,645 staff and offers teaching to more than 70,000 learners, said: “Like all providers in the sector, we’ve had to manage a reduction in central government funding.
“For Learndirect Limited this totals a 50% reduction in our adult skills funding over the last five years."
He added: “These funding reductions were made at short notice and required significant changes to the business for it to remain viable.”
The DfE today said it would gradually wind up its adult education services contract with the company. An adult education contract with the Education and Skills Funding Agency would end on the 31 July next year, he added.
The Ofsted report said: “Directors and senior managers failed to take swift and decisive action to stem the decline in performance over the past three years.
“Not enough learners and apprentices achieve their qualifications and develop the skills to enable them to progress at work or into further education and training.”
Learndirect said it will continue to meet its contractual obligations and the needs of its learners.
Originally founded as a charity in 2000, Learndirect was privatised in 2011 and had received £631m of public funds since then, according to the left-wing IPPR think-tank.
The government's decision to wind-down contracts will mean it now face collapse, senior research fellow Joe Dromey from the IPPR said.
“Just six years after it was privatised, Learndirect has been left on the brink of collapse, burdened by tens of millions of pounds of debt, and found to have been inadequate in an Ofsted report it tried to block in the courts,” he said.
This represented a failure of public policy rather than just the failure of a private company, he added.
The company argued in the courts that the Ofsted report was “unrepresentative” because it would create a risk of “irreparable damage including financial consequences”.
Learndirect also said the sample size of 0.6% used by inspectors wasn’t representative of such a large organisation but a bid to silence the report was overturned on Friday by the courts and reporting restrictions were lifted.
