Learndirect, which offers apprentices and adult training at sites across England, is facing a fight for survival after the government announced it intends to cut all funding to the firm within a year.
The news comes after the High Court this week rejected Learndirect's judicial review of a damning report by the education inspector Ofsted in March, which awarded the company its lowest possible grade of four.
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The department issued a statement today announcing that it would end all contracts when they are due to expire, by July 2018.
This is a major concession to the firm, says the BBC, as the government would normally issue a "three-month termination notice" on any company that receives the low grade.
Nick Linford, the editor of FE Week, which successfully challenged reporting restrictions on the case, said: "It was clear from the court case that Learndirect had been told by the government… they would not receive special treatment.
"So in recent days I think political pressure has been put on the government's funding agency to give Learndirect special treatment."
Learndirect had succeeded in securing an injunction against reporting the case while the review was being heard, as it said it would have to "call in administrators" in the event of the government contracts being pulled.
The company is "almost entirely reliant" on central government funding worth £158m for apprenticeships and adult education, reports the FT. It employs 1,600 staff and has 73,000 trainees.
It will continue to receive around £50m provided by the European Union via the government, which is payable over six years.
A subsidiary, Learndirect Apprenticeships Ltd, which was set up last year to take apprentices referred by employers and was funded by the new "apprenticeship levy" will also be unaffected.
Ofsted's report gave the firm an "inadequate" award and said the management of apprenticeships was "ineffective". One third of apprentices failed to receive the off-the-job learning to which they were entitled.
FE Week says that Learndirect's apprenticeship achievement rates have been steadily falling for three years. Since 2014/2015 they have been below the minimum pass rate of 62 per cent.
Learndirect said the Ofsted inspection "did not give a true reflection" of its performance as it was based on a sample size of 0.6 per cent of learners. It claimed in its review that inspectors had a "predetermined" negative view.
The company said that learners would be "fully supported as they proceed with their courses as usual".