The largest provider of the government’s National Citizen Service has confirmed it will play no further part in the scheme, affecting about 400 of the charity's 450 permanent staff.
The National Citizen Service Trust, the royal charter body that runs the scheme on behalf of the government, said earlier this month that it would no longer contract The Challenge after it had been unable to reach an agreement on a requirement to use a shared IT system that ensured value for money and protected young people’s data.
The Challenge had been contracted to run the programme for 16 and 17-year-olds in London, the south east and the West Midlands until December this year, contracts that it is estimated have been worth more than £60m a year to the charity.
The Challenge, which was founded in 2009, employs about 450 permanent staff and a spokeswoman said about 400 jobs would be affected by losing the NCS contracts.
A joint statement on Monday from Bill Ronald and Oliver Lee, chair and chief executive respectively of The Challenge, said the charity had been in discussions for several months with the NCS Trust about NCS provision for 2020 onwards.
"Regrettably, we have been unable to resolve certain important contractual issues that adversely affect The Challenge’s ability to operate on that future landscape," the statement said.
"It is therefore with much sadness that we confirm from 2020 that The Challenge will no longer play a role in the delivery of NCS to young people across the UK."
It said The Challenge would enter a period of change "as we refocus our energies and continue to explore new opportunities to achieve our ever more critical vision of an integrated society".
The statement said: "The Challenge will no longer be participating in NCS provision, but will continue its other important work, including through HeadStart, the award-winning programme developed in partnership with the Mayor of London and leading employers, to bridge the gap between education and employment, whilst enabling young people to meet those different from themselves and become socially active in their local community."
It concluded: "Everyone at The Challenge wishes the very best to those now charged with delivering NCS to the young people of the UK.
"We remain passionate advocates for NCS and stand ready to help in any way we can to promote and support this important work."