The Role of SME Apprenticeships in Combating Rising Youth Unemployment

“Unemployment has been rising and young people in particular are feeling the effects.”

So began BBC Radio 4 World at One’s report on yesterday’s Labour Market data release from the Office for National Statistics. The facts are stark, the number of under 25s out of work has hit 757,000, with one in seven young people are now unemployed. To be clear, those are young people who are actively seeking work but unable to secure a job.

Last week, the sector marked National Apprenticeship Week 2026, celebrating apprentices’ achievements, employers’ innovative programmes and providers’ exceptional support. The contrast is genuinely shocking, a jolt that reminds us that whilst there are compelling success stories, we have so far yet to go in a challenging climate.

Why We’re Asking Employers to Make It an Apprenticeship

Apprenticeships have a vital role to play in addressing the challenge our young people are facing in accessing work. There is plentiful evidence, including from Youth Futures Foundation, that they deliver ‘above and beyond’ in improving young people’s employment prospects. And it’s no longer ‘news’ that the number of level 2 and 3 apprenticeships available to bridge the gap into employment for young people has fallen dramatically over the last decade.

That’s the reason why last week, a partnership between Youth Futures Foundation, Amazing Apprenticeships and Workwhile (the organisation I lead) launched a new campaign aiming to increase the number of level 2 and 3 apprenticeships for young people. Make it an Apprenticeship asks employers to do just that: to make as many entry level roles into apprenticeships as possible, and to make them level 2 apprenticeships wherever they can.

Small and medium sized employers (SMEs) are critical to ensuring opportunities are available to young people. Traditionally the accessible employers of young people in all our communities, it is SME apprenticeships which have fallen away since 2017. The Fabians found last year in their Levying Up report that the fall in SME apprenticeship starts accounts for 97% of the fall in apprenticeship starts over this period.

Well-Intentioned Policy, But Will It Be Enough?

In this context, the government’s increased support for SME apprenticeships is of course welcome. Following announcements in last November’s budget, training costs for apprentices under the age of 25 will be fully funded for non-levy paying employers from August this year. The actual saving this represents varies depending on the value of the apprenticeship standard, but is as much as £1,350 per apprenticeship for some of the most expensive apprenticeships – a valuable saving for a small business.

However, based on existing evidence, this is unlikely to make the dramatic effect young people need and the government is hoping for. The introduction of full funding for SME apprentices aged under 22 in April 2024 has so far had very little noticeable impact. A comparison of apprenticeship starts between 2023/24 and 2024/25, before and after this change, shows a continued fall in apprenticeships for under 19s, and a smaller increase for 19-24 year olds. The available data for 2025/26 to date show an additional 1,040 apprenticeships (a 1.3% increase) for under 25s in total, again with an increase in those for 19-24 year olds masking further decline for under 19s.

More troubling is the likely, and presumably unintended, impact of the corresponding increase in the co-investment rate charged to levy payers who utilise all of their levy funds from the current 5% to 25%. This is entirely reasonable for the small number of large national and multinational companies who fully spend all of their own levy funds on extensive apprenticeship programmes, and the change is unlikely to reduce apprenticeship supply.

The position is very different for businesses who are just above the £3m annual salary threshold and therefore pay a small amount of levy. Using the median UK salary rate as a rough guide, these are companies with as few as 75 employees, so very much SMEs in terms of the typical ‘fewer than 250 employees’ definition. They frequently use all the funds in the small levy pot they have, and will then be asked to pay five times as much as they are used to for each apprentice, regardless of age. It is highly likely that, in a difficult economic climate for SMEs, this will cause a reduction in apprenticeship supply when we need the opposite.

We Know What Works, Now We Need to Fund It

Beyond this, we are still existing in a policy landscape of carrots and sticks, with little attention, less still funding, given to services offering a vital layer of support. The case has been made powerfully by Edge Foundation, amongst others, for the role of intermediary support in helping SMEs to offer high-quality apprenticeships. There is no mystery here for government to solve. We know what works, and have proven examples of high-impact practice from organisations like Workwhile, our support alone has enabled SMEs to create 3,000 new apprenticeships since 2020.

Likewise, we speak regularly to SMEs who are keen to offer an employment opportunity to a young person, but concerned that any support that has helped an individual to become ‘work ready’ will fall away once they’re in work. As a small employer, with limited capacity and in-house expertise, that leaves them feeling very vulnerable that they might not be able to support a young person’s mental health, housing, or other needs, or know where to turn to access support. SMEs need confidence that they and their young employees have access to readily available transitional support.

If we’re to reverse recent trends in youth unemployment, level 2 and 3 apprenticeships have a huge role to play. But if we’re to successfully encourage SMEs to ‘Make it an Apprenticeship’ in challenging times, we need to ensure well-intentioned policy changes don’t have unintended consequences, and that all the support employers need is readily available.

By Anna Ambrose, Chief Executive Officer of Workwhile

Workwhile is a small charity with a mission to create a fairer world of work.