The Association of Employment and Learning Providers (AELP) said current funding arrangements offer "a perverse set of incentives", which encourage employers to focus programmes on adult and management-level placements rather than offering entry-level opportunities to young people.
The body said that current arrangements fail to properly take into account additional off-the-job training young people may require such as gaining maths and English qualifications.
It said many small businesses are resisting engagement in the apprenticeship programme since the new regime required them to make cash contributions towards the cost of the training and assessment.
It added that employers of all sizes are frustrated with a new rule requiring that the off-the-job training within an apprenticeship must take up at least 20 per cent of normal working hours. These include NHS Trusts and commercial companies who said that they can't afford to lose staff for so long.
The AELP has said that unless action is taken, the government's social mobility agenda is at risk due to the increasingly limited opportunities for young people to access placements.
"The message came out from Downing Street over the summer that social mobility was still the number one priority for the government after securing a good deal for Brexit," said AELP chief executive Mark Dawe.
"Education ministers therefore need to get a firm grip on the apprenticeship reforms to stop a potential haemorrhaging of young talent missing out on opportunities that employers were previously willing to offer.
"The adult workforce needs apprenticeships too for business to meet the skills challenge.
"No big shake of the money tree is required to get these reforms on track but ministers do need to conduct a major reappraisal of where their priorities lie with apprenticeships if they are signed up to the Prime Minister's agenda."
The AELP is calling for all 16- to 18-year-old apprentices to be fully funded by the government, to encourage employers of all sizes to offer more placements to young people.
In March MPs criticised the government's apprenticeship policies for having a lack of focus and not filling widening skills gaps.