They say teenagers are so ill-prepared for the workplace that some had 'difficulties constructing emails, use text speak rather than properly constructed sentences, and had poor spelling and communication skills'.
Nearly half of employers said that they are most concerned with the English skills in young people, while 17 per cent cited maths as their main worry.
The report, by the Education and Training Foundation, surveyed of 1,400 employers, learners and training organisations.
It found that while GCSEs remain a well-respected qualification, many employers do not have a 'reliable grasp' of the skills and knowledge that GCSEs are meant to test.
The review – Making maths and English work for all –found that 77 per cent of employers think national action is needed to improve maths and English skills for those students who fail to achieve an A*-C grade at GCSE.
The review is calling for 'rigorous but flexible qualifications that signal to the employer the degree to which a learner has been successful in mastering the practical and applied English and maths skills required'.
David Russell, CEO at the Education and Training Foundation said: "Everyone knows – or thinks they know – what a GCSE in maths or English stands for. But other qualifications exist too, and are increasingly common post-16.
"Employers care about the quality of maths and English skills people have, not just the qualification. They told us about the type of knowledge and skills which hold real currency and support the success of their businesses.
"Nearly half of the employers we surveyed told us they recognised Functional Skills, and most of those who did so valued them for their content and approach."
Nick Boles, the skills minister, added: "This report finds the current Functional Skills system is generally serving its purpose, and reflects the Government's commitment to ensure all adults have the opportunity to study English and maths.
"I welcome the new evidence provided by the Foundation and its recommendations for improving the quality and recognition of Functional Skills to ensure they meet the needs of employers and learners, as well as improving understanding of all English and maths qualifications outside of GCSE."
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