A third of employers are considering hiring staff from abroad because of a shortage of skilled workers.
Research by awards body City & Guilds showed that half of employers believed the education system did not meet the needs of business.
A survey of over 1,000 small, medium and large businesses found that almost two-thirds said their sector was facing a skills shortage, especially those in the technology sectors.
Just over half of employers said they would hire someone without a degree, amid more evidence of the importance of numeracy, literacy and communication skills.
Chris Jones, director general of City & Guilds, said: "This research has huge implications for the government's attempts to curb youth unemployment, which still lags at around one million.
"The issue is not simply a lack of job opportunities. There is a more fundamental problem with the qualifications, core skills and lack of understanding of the workplace that is preventing young people from successfully finding employment.
'It is clear that a step change is needed in the education system to move away from a pure focus on academia towards a curriculum that meets the needs of employers."