Confidence is High, now Providers need to turn it into Action

The State of the Skills Sector 2026 reveals that skills providers largely have confidence in their own performance, but far less certainty about policy, funding, employer demand and AI initiatives. We consider four practical moves providers can make now.

The skills sector has long been challenged to make long-term decisions in a short-term environment. Providers grapple with planning investments, responding to reform, meeting ever-changing employer needs, adopting new technologies and, crucially, creating more opportunities for more learners, while the policy landscape shifts around them. That is precisely why AELP and Bud Systems came together this summer to produce the inaugural State of the Sector 2026 report which provides robust evidence and valuable insight as well as a clearer picture of the challenges and opportunities facing providers today.

What’s clear from the findings of the first report is that the skills sector does not need more predictions about what might happen next. It needs practical ways to make sound decisions while funding, policy and employer demand continue to shift.

More than four in five respondents describe their organisation’s performance as good or very strong, and 72% remain confident about their future prospects. This is a sector that believes in its own capability.

But this confidence falls sharply when providers start to look beyond the boundaries of their own organisation. The same 72% identify policy uncertainty as a major pressure. Sixty-nine per cent do not believe current funding supports sustainable delivery, and only 15% believe policy provides enough clarity for long-term planning.

Providers trust their people and their ability to adapt; they are less able to trust the conditions in which their decisions must succeed. Their concerns may also point beyond their own organisations: providers that did not have the bandwidth to respond to surveys such as this may be precisely those feeling these pressures most acutely. Waiting for those conditions to become certain is not a viable strategy. The practical challenge is to build readiness: the ability to make an informed decision, watch the right signals and adjust deliberately.

Future priorities

Employer engagement and growth is the most frequently mentioned investment priority.

Almost two thirds of respondents expect apprenticeship delivery to grow over the next two to three years and more than half anticipate expanding into new markets or sectors. Those ambitions all rely on employers having the confidence to recruit, invest and develop their workforce. Employer demand is not simply another priority identified in the report; it’s a thread that connects many of its findings.

The same applies to young people and NEETs.

National debate rightly places increasing emphasis on improving opportunities for younger people, particularly those at risk of missing out on education or employment. Nearly half of respondents expect to place greater emphasis on younger learners, while ITPs already deliver 60% of apprenticeships for young people. Set against the report’s wider findings on employer demand, this suggests that providers’ growing focus on young people is not yet translating consistently into conversations with employers. Turning this appetite into opportunities will also depend on employers being brought on board, as provider enthusiasm alone is not enough. Perhaps the most thought-provoking thread in the report is AI.

Few topics receive more attention across the sector, yet just 51% of respondents identify AI and automation as a future investment priority. That means almost half do not. This reflects two things: the reality that organisations are weighing AI alongside reform, workforce capacity, employer engagement, funding and other competing priorities, and the realisation that the sector is struggling to keep up. 

So the theme that stayed with us after analysing this report’s findings wasn’t confidence – it was readiness.

Readiness as the ability to make informed decisions despite uncertainty. To understand employer needs. To invest where it will make the greatest difference. To build the systems, leadership and organisational capability that allow us to respond as circumstances continue to evolve.

Building operational readiness

1. Plan in shorter cycles – without losing sight of the long term

Longer, more reliable planning cycles and greater policy and funding certainty remain essential. But providers cannot wait for those conditions to emerge. Fixed annual plans could struggle to absorb this much movement, while an enormous strategy document containing a contingency for every possible outcome is not the answer either. Providers need to become more comfortable with shorter decision cycles..This requires a slightly different mindset. Plans become something to revisit, learn from, and course-correct, rather than defend simply because they have been agreed.

Emerging evidence, changing employer needs and operational insight are all opportunities to ask whether the organisation is still moving in the right direction. Providers who recognise change early, make sense of it and respond without losing sight of their wider purpose will navigate the next few years most effectively.

2. Make employer demand an operating input

Employer engagement and growth is providers’ leading investment priority. Sixty-two per cent expect apprenticeship delivery to grow and 56% expect to diversify into new markets or sectors. Yet only 20% believe employer demand is aligned with current provision.

That is one of the sharpest tensions in the data. Growth plans based on assumed demand create risk for provision, recruitment and capacity. The same is true of ambitions to create more opportunities for young people: those opportunities ultimately depend on sustainable employer demand and viable delivery models.

Realising these ambitions reinforces the need to nurture and grow employer demand, including through a simpler system for employers and greater stability and longer-term certainty to support recruitment and training commitments.More employer meetings alone won’t close this gap. Providers need a repeatable employer feedback loop: a small set of consistent questions about skills gaps, changing roles, recruitment pressures and willingness to engage; a regular cadence for gathering the answers; and a route for recurring patterns to influence decisions about provision and delivery. They also need to close the loop by telling employers what they changed – or what they didn’t, and why.

3. Use delivery data to create capacity, not just reports

Providers are generally confident that their systems support core delivery. Confidence is lower when the job is to turn information into reporting and insight (60%) or operational efficiency (57%). Remember, capacity is not just about headcount. It’s also created or lost through chasing, reconciliation, disconnected workflows and learner risk that becomes visible too late.

Consider one learner or staff journey – onboarding, reviews, evidence, progress or intervention – and map where people wait, repeat work or discover problems late. Then identify the few leading indicators that should prompt action, give someone responsibility for acting on them, and measure whether the change reduces rework or improves the speed and quality of intervention.

4. Make AI serve a real operational priority

Only fifty-one per cent of respondents expect to invest in AI and automation in the coming 12 months. Our concern here is that AI is already moving into mainstream investment decisions while so many providers organisations are still working out where (or even if!) it can create value safely.

‘Tools’ are the wrong starting point. More effective is to identify real moments of friction or missed support. A learner asks, “I’m stuck – what should I do next?” A generic AI assistant can produce a plausible answer. A useful AI assistant with the right context – the learner’s programme, progress, previous feedback and upcoming milestones – produces a truly valuable one.

Providers need to establish responsible AI operating models with clear boundaries, approved information, escalation routes and an explicit point at which a human takes responsibility.

Before piloting any initiative, providers should consider four things: Is the problem itself valuable enough to solve? Can the AI access the context required to produce a relevant response? Are the guardrails and human accountabilities clear? Is there a baseline and outcome against which value can be judged? Impressive tooling is not evidence of readiness if any one of those is missing.

In summary

The report doesn’t present a sector in crisis, nor does it present one that is comfortable standing still. It captures providers at a point where resilience is no longer the defining story. But it also points to a sector somewhat paralysed by uncertainty.

Adaptation has to become part of every day. We now have to start making the decisions that will shape the next phase of the sector’s development.

Creating the conditions that enable those decisions, through clear policy, sustainable funding, strong employer partnerships and thoughtful investment, is a challenge that extends well beyond providers themselves. It is one that matters to everyone with a stake in the future of skills.

By Dani Juson, Head of Marketing, Bud Systems and Neil Anderson, Head of Marketing, Association of Employment and Learning Providers (AELP)