Prime Minister to announce Apprenticeship Levy Reforms with £60M investment for young people and SME’s

Major package of reforms to support small businesses in PM’s first economic speech since the Spring Budget. Under the new plans, large employers who pay the apprenticeship levy will be able to transfer up to 50% of their funds to support other businesses to enable 20,000 more apprenticeships for young people and SMEs.

The reforms will see the removal of co-investment costs from non-levy paying employers from April 2024 for apprentices under the age of 22, fully funding this provision; an increase in the levy transfer cap from 25% to 50%; as well as the DfE budget for apprenticeships increasing to “over £2.7 billion” from next year.

In his first economic speech since the Spring Budget, the Prime Minister is expected to set out a major package of reforms to support businesses to deliver more apprenticeship places, cut red tape for SMEs and leverage more private investment in female founders at the Business Connect conference in Warwickshire today [Monday 18th March].

The Government will fully fund apprenticeships in small businesses from 1st April by paying the full cost of training for anyone up to the age of 21

The Government will fully fund apprenticeships in small businesses from 1st April by paying the full cost of training for anyone up to the age of 21 – reducing costs and burdens for businesses and delivering more opportunities for young people to kick start their careers.

This will remove the need for small employers to meet some of the cost of training and saves time and costs for providers like further education colleges who currently need to source funding separately from the government and businesses.  

Additional £60 million of new government funding for Apprenticeships next year

The move is underpinned by an additional £60 million of new government funding for next year, guaranteeing that where there is demand for apprenticeships from businesses, the government will ensure there is enough funding to deliver them.  

From the start of April, the government will also increase the amount of funding that employers who are paying the apprenticeship levy can pass onto other businesses. Apprenticeships can currently be funded by a levy paying employer transferring up to 25% of their unused levy to a different employer. 

Large employers who pay the apprenticeship levy will be able to transfer up to 50% of their funds to support other businesses

Under the new measures, large employers who pay the apprenticeship levy will be able to transfer up to 50% of their funds to support other businesses, including smaller firms, to take on apprentices. This will help SMEs hire more apprentices by reducing costs and enabling more employers to get the skilled workers they need while unlocking more opportunities for young people in a huge range of sectors, industries, and professions. 

Hundreds of large levy-paying employers have already taken advantage of the opportunity to transfer their unused levy funds to other businesses. As of [December 2023], 530 employers including ASDA, HomeServe and BT Group have pledged to transfer over £35.39 million to support apprenticeships in businesses of all sizes since September 2021.

20,000 more apprenticeships

Taken together, these measures are expected to enable up to 20,000 more apprenticeships, primarily for young people, and is part of our plan to build a stronger economy and deliver a brighter future where hard work is rewarded and young people get the skills they need to succeed in life.

This also builds on our record of transforming apprenticeships over the last decade. Since 2010, we’ve helped 5.7 million people start an apprenticeship, working with employers to develop almost 700 new high-quality standards and increasing the funding for apprenticeships to over £2.7 billion from next year.

Prime Minister Rishi Sunak said: 

“Growing up in my mum’s pharmacy, I know first-hand how important small businesses are. Not just for the economy, but as a driver for innovation and aspiration, and as the key to building a society where hard work is always recognised and rewarded.

“Whether it’s breaking down barriers and red tape for small businesses, helping businesses hire more young people into apprenticeships and skilled jobs or empowering women to start up their own businesses – this government is sticking to the plan and leaving no stone unturned to make the UK the best place to do business. 

“Taken together, these measures will unlock a tidal wave of opportunity and make a real difference to businesses and entrepreneurs across the country.”

Education Secretary, Gillian Keegan said:

“This Government has built a world-leading apprenticeship system from the ground-up – with apprenticeships now available in around 70 per cent of all occupations.

“Apprenticeships are a fantastic way for businesses to develop the skills they need, and these new measures will help more businesses and young people benefit from them.”Apprenticeships are a fantastic way for businesses to develop the skills they need, and these new measures will help more businesses and young people benefit from them.

“Our plan to deliver a high-growth, high-skilled economy is working, with more opportunities available to young people than ever before.

This is the third Business Connect conference to take place since it was launched by the Prime Minister last year and is expected to convene over 150 SMEs, as well as government ministers to discuss how we can further support businesses to grow and thrive in the UK.

The Prime Minister is also expected to announce further deregulatory measures to simplify both non-financial and financial reporting for SMEs which is expected to save thousands of businesses across the UK around £150 million per year. 

This includes increasing the number of companies which qualify as a smaller or medium sized business through a 50% uplift to the thresholds that determine a company’s size. This is expected to benefit up to 132,000 businesses who will be spared from burdensome form-filling and non-financial reporting requirements.  

The Government will also consult on further changes later this year including exempting medium-sized companies from producing strategic reports, which could save them a further £148 million a year and raising the employee size threshold from 250 to 500 employees, which will mean around 1,000 more large companies could become SMEs.

Secretary of State for Business and Trade Kemi Badenoch said:

“Almost every job in the UK is owed to what is, or what previously was, an SME. They are the engines of economic growth for this country. 

“Whether it’s through cutting red tape, unlocking investment or lowering business costs, today’s announcements show that this government is committed to doing all it can to turbo-charge SMEs so that they can go further and faster than ever before.”

New industry led Invest in Women Taskforce

Speaking directly to businesses and delegates at the event, the Prime Minister will underline the government’s plan to create the economic conditions to encourage entrepreneurship and drive growth. As part of this, the Prime Minister is expected to announce a new industry led Invest in Women Taskforce to unlock private investment in female business leaders and make the UK the best place in the world to be a female founder.

The core aim of the Taskforce is to raise a bespoke funding pot for female-founded businesses through private capital and address the wider challenges that female entrepreneurs specifically face to help unlock their potential to establish and grow their enterprises. 

The new taskforce will be industry led and co-chaired by entrepreneur Debbie Wosskow and Barclay’s Hannah Bernard, with Small Business Minister, Kevin Hollinrake, representing the government. The membership of the taskforce will be set out in due course. 

Hannah Bernard OBE, Co-Chair of the Invest in Women taskforce and Head of Business Banking, Barclays UK said: 

“This is an area I am incredibly passionate about, so it is a privilege to be offered this position.  

“I believe that the key to the UK’s growth will be enabling every single entrepreneur in this country to thrive; female entrepreneurs face significantly higher barriers to get their businesses the support and investment they need, from seed funding for start-ups, through to the challenges of gaining scale-up investment. 

“I’m really excited to be working with Debbie who is an ideal partner given her entrepreneurial credentials and I believe together, we can make a real difference.”

Debbie Wosskow OBE, Co-Chair of the Invest in Women taskforce and multi exit entrepreneur said:

“Women leading businesses shouldn’t have to face funding challenges to build and grow their business, because of their gender. “Women leading businesses shouldn’t have to face funding challenges to build and grow their business, because of their gender. 

As an experienced entrepreneur, who founded her first business 25 years ago, I know first-hand the importance of breaking down barriers and making meaningful change for female led businesses. 

“By putting funding front and centre of this Taskforce, we aim to make the UK the best place in the world to be a female founder.”

Martin McTague, National Chair at the Federation of Small Businesses, said:

“We welcome these very important announcements on apprenticeships, as well as other action including helping more women start up in business. The Prime Minister is right to take decisive steps to support small employers do what they do best, providing jobs and opportunities in their local communities.  

“We have campaigned for more levy-paying businesses to be able to transfer their funds to small businesses in their supply chain, and for crucial support on costs, so we’re pleased to see the Prime Minister make this intervention today.” 

Time and resources are in short supply for small businesses and so increasing the amount of funding for training costs will help to improve the number of small firms entering the apprenticeship system.

Anthony Impey, Chief Executive of Be The Business and Chair of Apprenticeship Ambassador Network, said:

“Small businesses are run by some of the country’s most impressive and resilient people, but they are time poor and need a simple, straight-forward skills offer to access the talent they need to grow their businesses. 

“These changes will make a real difference in opening up apprenticeships for young people to kick start their careers at a time when small businesses are pushing forward to boost their productivity.”These changes will make a real difference in opening up apprenticeships for young people to kick start their careers at a time when small businesses are pushing forward to boost their productivity.”

Last month, the Department for Business and Trade held the first meeting of the newly established Small Business Council which acts as a powerful voice for small businesses within Government and has been tasked with overseeing three key areas for small firms – access to finance, skills and support as well as removing barriers.

Sector Reaction to Apprenticeship Levy Reforms

Responding to the Prime Minister’s speech on apprenticeships, David Hughes, Chief Executive, Association of Colleges said:

“This announcement from the Prime Minister recognises that the apprenticeship levy is failing young people, with numbers in apprenticeships now far lower than before the levy was introduced in 2017. That’s why we have long called for reform to the apprenticeship levy, not to stop it, but to make sure it results in more young people being able to access apprenticeships, in more small and medium-sized enterprises, in all regions and from all walks of life.

“The overall apprenticeship system is not working for many people, employers, areas of the country and sectors of the economy, and we have seen a dramatic decline in the number of young people undertaking apprenticeships. The targeted funding for all apprenticeships under the age of 21 will make a modest difference, but it is not enough. We urge the government to properly review the levy rules and incentives to ensure the apprenticeship programme works for young people, key sectors and for employers.”

Simon Ashworth, AELP Director of Policy, said:

“We will only resolve the country’s skills shortages with extra investment for apprenticeships and by making it easier for smaller employers to take on apprentices. Today’s package of changes is very welcome and could lead to 20,000 more young people accessing apprenticeship opportunities.

“In recent months, AELP has pushed heavily for reforms and extra investment to make it easier for young people and SMEs to access the apprenticeship system. These announcements are to be welcomed, and, in particular, it’s good to see the end of co-investment for young people. This is not only a cost barrier to SMEs, but our work showed the cost and bureaucracy burden to training providers usually outweighed the cash this actually brought in.

“Moving forward, we would like to see the end to co-investment for all-age apprenticeships and we will continue to lobby the government to ensure training providers are not unfairly penalised when an employer stops paying their contribution which voids access to the final 20% completion payment.”

Anthony Painter, Director of Policy at the Chartered Management Institute, said:  

“Apprenticeships are a critical investment in future growth and productivity. By enabling more support for small businesses and young people the Government is extending their contribution to future skills even wider. High-quality, work-based learning is critical right across the economy. Levy funding is an important component of that investment and, indeed, we should be looking at how we extend investment even further.

Leaders and managers need all the possible tools at their disposal to develop the workforce of the future. These announcements contribute to that. The best economies have highly skilled managers and a highly skilled workforce across all ages and all sectors.”

Kirstie Donnelly, CEO of City & Guilds said:

“Today’s announcement from the Government marks a positive step forwards in recognising skills as a lever for positive change. We welcome the decision to fully fund apprenticeships for individuals under 21 within Small and Medium Enterprises (SMEs), coupled with plans to increase the share of the apprenticeship levy funding accessible to SMEs. Together, these changes will unlock more opportunities for young people to earn whilst they learn and are a necessary step towards plugging the existing skills gap and stemming the decline of younger age groups taking up apprenticeships and those that find themselves not in education, employment or training. 

However, the Government needs to go further to unleash the potential of apprenticeships to upskill and reskill millions of workers through sustained investment in lifelong learning. There needs to be multiple entry-points and pathways baked into the funding system for better access to skills development that reflects the modern demands for learning and businesses alike. This will allow more people to access learning opportunities throughout their careers. Taking this whole system and long-sighted approach to skills that transcends political cycles and works with employers to prioritise sustained growth, recognising the need for more flexibility in the system, will both help to scale apprenticeships as a viable route for learners and pave the way for a workforce primed to turn around challenges that the economy currently faces.”

Responding to the Prime Minister’s speech on apprenticeships on 18 March 2024, Stephen Evans, Chief Executive of Learning and Work Institute, said:

“The number of apprenticeships, particularly for young people and in small firms, has plummeted in recent years. So measures to try and tackle that by reducing the cost of apprenticeships to small businesses are welcome. But we need wider change to the apprenticeship system if we’re to reverse the declines of recent years. That needs to include a focus on ensuring employers of all sizes increase opportunities for young people and people with low-level qualifications in particular. Anything else risks being a drop in the ocean in the context of employers investing half the EU average in training and graduates being three times more likely to get training at work than non-graduates.”

Commenting on the Prime Minister’s announcement, Mark Bremner, Chief Executive of Ofsted Outstanding independent training provider, MBKB, said:

“It is encouraging and validating to see the Government’s pledge to reform the apprenticeship levy and to invest a further £60 million to fund an additional 20,000 apprenticeship places. Easing the cost on small and medium-sized enterprises (SMEs) by eliminating the cost of training for anyone up to 21, doubling the proportion of funds that can be transferred, as well as the threshold for what qualifies as an SME, will cut costs and red tape for thousands of companies. 

“However, reform of the system must go further to meaningfully unlock apprenticeships and upskill workers across Britain. The government should abolish the co-funding requirement for all apprenticeships at SMEs, not just those under 21. The use of levy funds should be liberalised, too, allowing for more informal skills training for existing employees. Finally, the minimum apprenticeship duration should be put on a flexible, sliding scale that increases based on their level.

“An approach that is more accessible to SMEs and individuals looking to benefit from training has the potential to foster increased growth in apprenticeships and productivity in the years ahead.”

Kelly Becker, President of Schneider Electric, UK&I: 

“I welcome the Government’s pledge to create 20,000 more apprenticeships. Some of the best people I’ve worked with have scaled the ranks by starting out as apprentices. Apprenticeships offer a dynamic and fulfilling career path, fostering both technical and interpersonal skills that will set talent up for success throughout their careers.

“Crucially, these also play a key role in equipping people with skills that are vital in the burgeoning green economy. More green apprenticeships will help businesses innovate at every level, supporting the UK’s push to electrify our homes, vehicles and businesses and move away from fossil fuels.

“Greater investment in apprenticeships means greater opportunity for alternative career paths to nurture the next generation of industry workers. This will also create robust talent pipelines for key green industrial hubs up and down the country, helping to plug regional skills gaps and future proof workforces for years to come.”

Beatrice Barleon, Head of Policy & Public Affairs at EngineeringUK, comments:

“We welcome the Government’s commitment to offer more support for apprenticeships, particularly recognising the need to support small to medium sized enterprises (SMEs) with taking on more apprentices.

“We are particularly pleased to see the focus for the support is on young people aged 21 or under. Refocusing some of the apprenticeship budget money for young people is something we have called for in our recent ‘Fit for the future’ report with Lord Willetts and Lord Knight.

“While these measures are certainly a step in the right direction, more still needs to be done to ensure our apprenticeships system is a success. Government needs to consider the recommendations put to them as to how to better support SMEs with the processes surrounding apprenticeships and how to better help young people to be able to access the opportunities available and be ready for work.

“It’s clear there is still an apparent, and growing, mismatch between levy intake and the apprenticeship budget. In light of apprenticeship numbers needing to grow to meet demand in the engineering and technology sector, we would like to see greater transparency as to how this additional money is currently being spent.”

Matthew Percival, Director of Future of Work, CBI, said: 

“Small businesses will welcome support to help with the cost of apprenticeships. But a truly transformational skills policy needs to go beyond just apprenticeships and also support other training, through meaningful flexibility to the Levy so that it helps more people to gain the skills they need to progress in-work.” 

Dr Joe Marshall, Chief Executive of the National Centre for Universities and Business (NCUB), said: “Support for small and medium businesses in accessing apprentices is welcome. These businesses often grapple with smaller training budgets, and their engagement with universities is still recovering post-COVID 19.

“However, our larger businesses and employers face significant skills gaps which they alone are unable to resolve. With four in five businesses facing recruitment issues, the nation needs a comprehensive plan to address the crisis. Reforms to apprenticeships must be at the heart of this, transforming the Levy into a resource to enable comprehensive workforce skilling.”

Michelle Mullen, Vice President – International Advocacy at AICPA & CIMA, said:

“We welcome the government’s commitment to fully fund apprenticeships in small businesses for anyone up to the age of 21. We hope the funding will be made available up front, so that small businesses will be able to take advantage of it without experiencing a negative impact on their already stressed cash flows. In time we hope to see support for apprentices of all ages, because upskilling our workforce is critical to generate the productivity gains we need to see in the economy.

We are especially pleased by the increase in the percentage of unspent Apprenticeship Levy funds which can be transferred to another business. This is something we have been advocating for, and we welcome the government’s new measures, which will widen access to apprenticeships and help upskill the workforce to meet the needs of the modern marketplace.” 

Ben Willmott, head of public policy at the CIPD, the professional body for HR and people development, said:

“It’s welcome news that the Government plans to fully fund apprenticeship training in small firms for people aged up to the age of 21. This will go some way towards encouraging more smaller businesses to take on apprentices and ensuring that it is younger people that benefit from these opportunities.

“However, the additional 20,000 apprenticeships it’s hoped these changes will help create isn’t nearly sufficient to address the collapse in the use of apprenticeships we’ve seen among SMEs and young people since 2017. This gap in apprenticeship provision will largely remain. Likewise, increasing the proportion of levy funding larger employers can transfer to smaller firms to help them take on apprentices is also unlikely to have a big impact as to-date few levy paying firms have used the levy transfer mechanism at all. 

“Tackling these issues and the ongoing fall in investment in workplace training requires more fundamental reform of the Apprenticeship Levy to make it more flexible and responsive to employer and learner needs. 

“A more flexible skills levy would mean employers could use levy funding to develop existing staff through other forms of accredited training and skills development which are cheaper and usually much more suitable for employees aged 25 and over. This would at the same time leave more money to invest in apprenticeships for young people who most need and benefit from them.”

 Nikolaz Foucaud, EMEA Managing Director, Coursera said:

“The PM’s announcement of an additional £60 million funding to underpin apprenticeship support will be a lifeline for businesses tackling skills shortages. With talent droughts across the board, the government’s investment marks a welcome boost to training and will help settle the UK’s disrupted market in the long-term as well as unlock more opportunities for young people across sectors.”

“In today’s fast changing labour market, there is a greater need for a diversified, complementary skilling approach to vocational education. The blend of hands-on apprenticeship experience with the flexibility and versatility of online learning could form the foundation of a potent strategy to empower the UK workforce for a thriving digital future. Forward-thinking leaders will see the value in doing the groundwork now, developing practical, job-relevant skills to prepare for an ever-shifting business landscape.”

Suzanne Slater, Commercial Director at NCFE, said:

“This is a step in the right direction from the Government – especially fully-funded apprenticeships for those up to the age of 21. This could help increase the recruitment of younger learners into apprenticeships. Having more levy available for SMEs is also positive, but still doesn’t address the bureaucracy involved in recruiting apprentices through the complex systems and processes they have to endure, including no support with set-up costs or compensation for mentoring time.

“The devil is in the detail with the future investment announced here. How will it be spent? A high number of standards are still underfunded with providers having to pick up significant costs for equipment to ensure that apprentices are trained properly – let alone the cost of trainers, teachers, and assessors. Despite a recent increase in Functional Skills funding, it still doesn’t cover the cost of tuition needed for a large proportion of learners who didn’t achieve an adequate level of maths or English at GCSE.” 

Commenting on today’s apprenticeship announcements by the Prime Minister, REC Deputy Chief Executive Kate Shoesmith said:

“Cutting the cost of apprenticeships is useful to SMEs in a slow economy and when the volume of young people aged under 24 years old starting an apprenticeship has hardly increased for 20 years. But today’s announcements are not the concerted reform of apprenticeships required to better contribute to overcoming labour shortages, shortages which risk costing the economy up to £39bn every year – just short of two entire Elizabeth Lines.

“The lack of bolder reform today means the lack of flexibility to the apprenticeship levy remains a massive contributor to the skills system not working. This is because the funds are only available to those who have the same employer for at least one year – which is the time it takes to complete an apprenticeship. Out of the one million temporary workers on assignment in the UK every day, we believe around 960,000 are ineligible for levy funding. This underlines the need for the levy money to pay for modular and shorter courses. Reforming the levy to provide more individuals with a route to skilled work will boost business growth and productivity at a critical time for the economy.”

Lee Parkinson, chief executive at Efficiency North, said:

“We welcome the announcement that apprenticeships are getting not only the financial boost they need, but the attention in the media and wider government. As a flexi-job apprenticeship provider, we are passionate about supporting the construction skills gap. 

“The latest government data shows that 24,530 new apprentices were taken on in the construction sector between 2022-23, down from the 26,060 recorded the previous year (2021-22). This decrease could be attributed to the sheer amount of red tape businesses need to navigate in order to take on an apprentice, which is even harder, if not impossible for SMEs, coupled with the expense. 

“From April 1, the government will fully fund apprenticeships in small businesses, compared to organisations previously being required to fund the training aspect, a move which is expected to see an increase of 20,000 apprenticeships across all industries. Having supported many construction SMEs in hosting an apprentice, cost is a huge factor, particularly in the current challenging economic climate, so we hope to see this make a big impact. 

“Making a variety of routes to the industry viable and attractive to people is essential to tackling the skills gap, in addition to showcasing the range of options available to employers looking to future-proof their workforce. 

“However, the news today is only impacting those up to 21 years old. While many apprentices fall into this age category, there are a lot of others we don’t want to discourage from a career in construction by introducing upper age limits of 21. At any age you can train or retain to become an asset to the industry, so we’d like to see more inclusive opportunities go a step further.

“Furthermore, the government might consider simplifying Digital Apprenticeship Service accounts to aid the uptake of apprenticeships by SME and bolder steps are needed to fund in part or in full some apprenticeships for SMEs, which would certainly catalyze their uptake.

“That being said, this is a fantastic start that includes other benefits such as those who are paying the apprenticeship levy being able to share up to 50% of their funds, an increase of 25%. Equally important is the requirement for reporting to be simplified, supporting SMEs in removing those barriers. Overall, it’s a positive move and one that will further our work as a flexi-job apprenticeship provider helping more host businesses and apprentices. We’re looking forward to seeing the impact.”

Tom Bowtell, Chief Executive of the BCF, said:

“The coatings sector, which supports 14,000 jobs around the country, many of them in SMEs, welcomes the Government’s increased support for apprenticeships. However, more can still be done to make the scheme even more flexible to help increase the number of young people entering and thriving in one of the UK’s bedrock industries.

“We are in the middle of a growing worldwide skills shortage and while increased spending is welcome, we need a wholesale review of how apprenticeships are funded. Businesses will benefit from this new approach, allowing funds to be used across a greater range of training initiatives to ensure workforces are kept up to date with emerging technologies and processes. Ideally, these reforms should be part of an holistic, long-term industrial strategy for UK manufacturing.

“It is helpful that the UK Government is prioritising these changes to ensure we are getting the right young talent into the sector. The coatings sector is a British success story that creates jobs, contributes to the economy and sells to the rest of the world and a proud net exporter that contributes £4 billion a year to the UK economy.”

LJ Rawlings MBE, CEO of Youth Employment UK said:  

“With only 12.8% of young people confident that they can find quality opportunities where they live, we are pleased to see this additional funding focused on young people and smes. 

“But we do not believe that it will go far enough to support the growing and complex issues of youth unemployment. The number of NEET young people rose in the last quarter and so we must see greater ambition from the government in tackling the issues young people face. This year’s Youth Voice Census which is open now to young people to take part in, will paint a very clear picture of those issues. 

“Our Members have also continued to tell us that it is often the bureaucracy of the apprenticeship system that limits their engagement, and this is why in the Post-16 Education & Skills Commission, Pathways for All and in the work of the Youth Employment Group we have called for more levy flexibility, increased employer incentives, improved support and for the removal of barriers such as English and maths on entry into L3 qualifications. 

“We are working with our Members to help them better understand how they can recruit, develop and retain young people, particularly with the concerning issues around completion and in May this year our Members will be able to complete the 2024 Good Youth Employment Benchmark and see how their support for young people could be further developed. 

“We shall continue to work with our Members, young people and the government to try and take the next steps beyond those announced by the PM to ensure our education and skills system works for everyone.””We shall continue to work with our Members, young people and the government to try and take the next steps beyond those announced by the PM to ensure our education and skills system works for everyone.”