IMI: The sums don’t add up on apprenticeships for SMEs

New analysis from the voice of the automotive sector shows training savings for SMEs are wiped out by the rise in the minimum wage and NI contributions

Following the announcement in the Autumn Budget that apprenticeships will be free for SMEs, the Institute of the Motor Industry (IMI), the voice of the automotive workforce, has been doing the sums. And it has come to the conclusion that the numbers don’t add up.

The government has removed the 5% co-investment for SMEs training under-25 apprentices – estimated to save employers £650–£800 per apprentice. However, the apprentice minimum wage rise from £7.55 to £8.00 per hour also announced at the Budget, combined with the employer’s National Insurance contribution increase announced earlier in the year, means the ‘free training’ is cancelled out and SMEs will actually face increased wage costs. 

Nick Connor, CEO of the IMI said: “We were delighted to see the government’s commitment to apprentices and their fair pay in the Autumn Budget, which was further underlined in the recent announcement that reforms to the apprenticeship system will help to tackle youth unemployment with 50,000 places allocated. However, having now analysed the costs in detail, it appears the reality is that SMEs will actually face additional costs that are likely to create more barriers to offering apprenticeships.

“A poll of IMI members[1] has shown that many do not believe the Autumn Budget reforms will make apprenticeships more affordable, with wage costs rather than the training contribution, the real financial barrier. And, if guidance for SMEs to offer apprenticeships remains complex, this will create a further barrier for already time-poor organisations.

“SMEs are not just employers; they are the backbone of the automotive talent pipeline in every region of the UK. They provide vital entry-level opportunities that help reduce youth unemployment and prevent young people from becoming NEET. If the apprenticeship system remains costly and complex for small businesses, the sector risks losing one of its most powerful levers for attracting young people into skilled, sustainable careers.

“The reforms are well-intentioned, but the financial impact is negligible for the employers who need the most support. To boost apprenticeship take-up, the government must address wage affordability, not just training fees.

“Automotive has experienced a 30% decline in apprenticeship starts since 2018/19, an average loss of over 500 apprenticeships per year. And, sadly, it seems the government’s intent is not going to do anything to help the 96,000 SMEs that make up such an important part of the sector.

“To deliver on its ambitions for apprenticeships and tackling youth unemployment, the government must go further by removing additional financial and administrative barriers facing all businesses, regardless of size, recognising that while fair pay for apprentices is essential, rising overall employment costs and system complexity continue to act as major obstacles.”

IMI Analysis:

The ‘free training’ offer does not reduce the actual cost of hiring an apprentice:

• Level 2 Autocare Technician: SMEs save £650 on training but pay £819 more in wages and £122.85 in additional employer NI which means a net cost increase of £291.85.
• Level 3 Light Vehicle Technician: £800 saving versus £819 wage rise and £122.85 in additional employer NI which means a net cost increase of £141.85
  
  

[1] IMI members surveyed December 2025 – 172 responses