UK businesses need to increase spending on staff training if they want workers who measure up in basic skills such as literacy and numeracy, a report says.
Many workers lack basic literacy and numeracy skills
The National Audit Office (NAO) said firms should be made more aware of the benefits of lower-level training.
Most firms focus on training from an A-level equivalent standard, but that is often too high, the NAO found.
Firms and the government need to "fill the gaps left by market failure in education and training", the NAO said.
"A more skilled workforce is vital for national productivity and the delivery of public services," said auditor general Sir John Bourn.
"Better skills are also important for the country to maintain its position in an increasingly competitive global economy," he added.
According to NAO figures, a total of £23.7bn is spent on education and training by employers in the public and private sectors.
Even so, one in five firms admits to having a skills gap in their workforce.
The cost of that is about £10bn a year in lost productivity, the NAO estimates.
Even so, many companies "may be reluctant to fund or release employees for basic skills, especially when most people might be expected to become proficient in literacy and numeracy before they leave school," the report said.
In order to give companies a helping hand, the government could work more closely with employers, tailoring programmes to fit regional and skill specific problems, as well as simplifying the information about what help is available.
The Department for Education and Skills (DfES) said that millions of UK adults lacked the essential literacy, numeracy and language skills needed for the workplace.
"Employers need to recognise this reality and play their role investing in training and helping employees master the basics and progress," a DfES spokesman said.