The Department for Education and Skills (DFES) closed the scheme in November due to fears that the computer systems used to administer ILAs may have been compromised by hackers or fraudsters posing as training providers.
But the suspension of the £260m scheme, which was created to encourage workers who would not normally have access to training to improve their skills, has left legitimate IT training companies facing the prospect of heavy redundancies or closure.
The UK's three largest IT training companies, Pitman Training, Internet Exchange and Best Computer Training, said this week that 20% of their 350 training centres would be forced to close or make staff redundant within the next month unless the Government releases suspended ILA funds. Bookings have fallen by 70% compared to the same time last year, they said.
The impact on smaller IT training companies could be far more serious, with thousands of firms facing job losses or closure, said Roger Tuckett, whose Henley-based training company is among the early casualties of the ILA scheme's closure.
"There is a danger of serious job losses. Between 1,000 and 2,000 jobs have already been lost and up to 5,000 are at risk," he said. "Between 25% and 60% of the learning centres could close in the next four to six months."
Pitman, Best, and Internet Exchange, which have joined forces as the Association of Computer Trainers (Act), have written to the DFES urging it to release more than £1m to honour their existing ILA contracts, following the closure of the scheme two weeks earlier than announced.
Act, which is seeking to recruit other large IT training companies to lobby the Government, has warned it may have no choice but to seek a judicial review of the Government's handling of the ILA programme unless it can enter constructive talks with the DFES.
James Eades, operations director at Best Computer Training, said he hopes the DFES, which he said has been refusing to answer questions from training providers, will begin a dialogue with the group before legal action becomes necessary. "Our preferred outcome is to have a consultation and a worthwhile discussion," he said.
Act is concerned that the public's trust in IT training providers may have been severely damaged by the collapse of the ILA scheme. Evidence from training centres suggests that the public, now used to government-subsidised courses, are no longer willing to pay commercial rates for IT training.
"By introducing ILAs the Government has totally distorted the market. People perceive the price of computer training to be about £35. When we want to sell at prices that we were happy to sell at pre ILA we are finding it very difficult," said Eades.
Separately, smaller companies are also threatening legal action. Training and software company wwwdot group said it plans to issue a writ against the DFES today to recover an outstanding £1.3m in ILA grants. The sum is needed to honour training contracts that were in place before the scheme's suspension.
The firm has formed a pressure group, the European Association of Training Organisations, to fight the case and to represent smaller training companies interested in joining the legal action.