The Industrial Strategy commits to £1.2 billion additional investment in skills per year by 2028-29

Skills System Reforms and Funding

Major Funding Commitments

The Industrial Strategy commits to £1.2 billion additional investment in skills per year by 2028-29, alongside measures outlined in the Immigration White Paper. This represents a significant boost to the FE sector, with £400 million allocated specifically for 16-19 provision in 2025-26. Colleges will receive £160 million in investment to address critical priorities, including recruitment and retention challenges.

Looking ahead, the government has committed £1.7 billion in capital funding from 2026-27 to 2029-30 to help colleges maintain their estate condition, with annual allocations rising in line with inflation. An additional £375 million in capital investment will support post-16 capacity to accommodate the additional learners entering the system.

Growth and Skills Levy Reforms

From April 2026, the Growth and Skills Levy will fund short courses in digital, artificial intelligence, and engineering, supporting Industrial Strategy sectors such as Creative Industries and Advanced Manufacturing. The rollout of shorter duration and foundation apprenticeships will begin in August 2025, initially covering engineering, manufacturing, and digital sectors. Skills England will work to determine which courses are prioritised in the first wave of rollout and subsequent phases, considering how these sit alongside apprenticeships and other training routes.

Skills England Role

Skills England emerges as a central coordinating body responsible for bringing coherence and simplifying the skills landscape. The organisation will co-design solutions to skills shortages in collaboration with businesses and work with devolved governments to create a coherent and accessible skills system for the eight priority sectors across the UK. Skills England will support Local Skills Improvement Plans that align with Local Growth Plans and coordinate with the Industrial Strategy Advisory Council on workforce strategies.

Technical Excellence Colleges and Specialist Provision

Construction Technical Excellence Colleges

The construction sector will benefit from the establishment of 10 construction Technical Excellence Colleges as part of a comprehensive £600 million construction package over four years. This initiative aims to train up to 60,000 more skilled construction workers through expanded construction course provision, extended Skills Bootcamps, and industry placements designed to help learners become ‘site-ready’.

Engineering Technical Excellence Colleges

Engineering skills development receives substantial investment, with over £100 million allocated over three years for engineering skills in England. Technical Excellence Colleges specialising in engineering will address critical shortages across Advanced Manufacturing, Clean Energy Industries, and Digital & Technologies sectors. Capital funding will be provided via the Skills Mission Fund, with Skills England ensuring that training and qualifications remain aligned with shifting workforce needs.

Defence Technical Excellence Colleges

The defence sector will see the establishment of new Defence Technical Excellence Colleges, with funding for defence-related skills courses and investment in cutting-edge university facilities for defence skills provision. This represents a joint endeavour between government and industry, with full details to be outlined in the forthcoming Defence Industrial Strategy.

Skills Mission Fund

The £200 million Skills Mission Fund provides capital investment to tackle sector-specific shortages and expand Technical Excellence Colleges beyond construction. This funding supports further education providers in investing in new facilities, equipment, technical qualifications, and collaboration with other training providers and employers.

Apprenticeships and Vocational Training

Apprenticeship Expansion

The strategy addresses the concerning decline in apprenticeship participation, which fell by almost a fifth between 2016/17 and 2023/24. Shorter duration apprenticeships will be introduced from August 2025 in engineering, manufacturing, and digital sectors, alongside the expansion of foundation apprenticeships to provide more opportunities for learning and earning in Industrial Strategy sectors.

The approach focuses heavily on the eight priority sectors, with Skills England working with industry to develop skills passports that build on best practice and previous examples. This will support the documenting and transfer of industry-recognised skills and competencies while improving visibility for employers and providers.

Skills Packages by Sector

TechFirst Technology Skills Package

The £187 million TechFirst technology skills package, announced at London Tech Week 2025, represents a comprehensive approach to digital skills development. The package will support over 4,000 graduates, researchers, and innovators in areas like AI, cybersecurity, and computer science through TechGrad, TechExpert, and TechLocal programmes.

A separate industry partnership with major tech players, including NVIDIA, Google, and Microsoft, aims to train 7.5 million UK workers in essential AI skills by 2030. The government will explore implementing AI skills recommendations from the Tech Adoption Review, including creating a UK-wide network of AI adoption hubs.

Engineering Skills Package

Engineering receives over £100 million in investment over three years, recognising that engineering skills are fundamental to several of the eight priority sectors. Working with Skills England, this investment will increase the skills pipeline through further and higher education and apprenticeships. The package includes launching Technical Excellence Colleges specifically for engineering, which is critical to Advanced Manufacturing, Clean Energy Industries, and Digital & Technologies sectors.

Defence Skills Package

The defence skills package will boost the number of skilled workers entering the defence sector, which is foundational for both national security and economic growth. This includes establishing Defence Technical Excellence Colleges, providing funding for defence-related skills courses, and investing in cutting-edge university facilities to increase places for defence skills provision.

Construction Skills Package

The construction skills package, valued at over £600 million over four years, aims to train up to 60,000 more skilled construction workers. The initiative includes establishing 10 construction Technical Excellence Colleges, expanding construction course provision, extending construction Skills Bootcamps, and providing industry placements.

Regional and Local Skills Initiatives

Local Innovation Partnerships Fund

The £500 million Local Innovation Partnerships Fund operates across the UK, with at least £30 million earmarked for each of England’s seven established Mayoral Strategic Authorities and dedicated funding for places in Scotland, Wales, and Northern Ireland. This fund aims to generate £1 billion of co-investment and add £700 million to local economies through new jobs, products, and services.

Devolved Responsibilities

A significant proportion of the Adult Skills Fund is devolved to Mayoral Strategic Authorities, targeting local skills needs in line with Local Growth Plans and Local Skills Improvement Plans. This provides further support to adult learners through Skills Bootcamps, Sector Based Work Academy Programmes, and Free Courses for Jobs.

Regional Skills Pilots

Specific regional initiatives include a Clean Energy Industries regional skills pilot in Aberdeen and a Professional Business Services skills hub in the Central Belt of Scotland. Various city region-specific skills initiatives are being developed to address local economic priorities and sector concentrations.

Adult Learning and Reskilling

Lifelong Learning Entitlement

The Lifelong Learning Entitlement, launching in January 2027, will enable individuals to learn, upskill, and retrain across their working lives. The first modular courses for approval will support progression into the eight priority sectors, representing a significant shift toward flexible, career-long learning opportunities.

Adult Learning Provision

The Adult Skills Fund continues to target local skills needs through various mechanisms, including Skills Bootcamps, Sector Based Work Academy Programmes, and Free Courses for Jobs. These programs are designed to provide pathways into the priority sectors while addressing regional economic needs.

Made Smarter Expansion

The Made Smarter Adoption programme will receive £99 million from 2026 to support an additional 5,500 small and medium-sized manufacturing businesses in technology adoption. The model will be expanded to create a dedicated scheme for the Professional and Business Services sector, alongside new demonstration programmes and adoption hubs for robotics.

Industry to Education Partnerships

HE Innovation Funding

HE Innovation Funding continues at £280 million in 2024-2025, supporting universities in England to work with business, charities, and the wider community for economic and social benefit. This includes de-risking early-stage innovation, providing business development support, and boosting entrepreneurship training.

University-Industry Collaboration

The strategy emphasises expanding industry placements and facilitating workforce exchanges with the further education system. Technical Excellence Colleges will deepen employer partnerships, while Skills England will engage with industry to develop skills passports that improve visibility for employers and providers.

R&D Partnerships

Research and development investment will reach £20.4 billion in 2025/26, rising to £22.6 billion in 2029/30, with funding targeted at the eight priority sectors. The £500 million R&D Missions Accelerator Programme will incentivise collaboration between industry and academia on applying research to real-world challenges.

Staff Development

Teacher Support

The £160 million investment in colleges addresses recruitment and retention challenges, particularly for courses covering skills in shortage in priority sectors. Nearly 6,000 early career further education teachers in areas such as STEM have received Targeted Retention Incentive payments worth up to £6,000 tax-free, demonstrating the government’s commitment to attracting and retaining quality teaching staff.

High Value Course Premia

High Value Course Premia will deliver funding uplifts to priority courses that support key Industrial Strategy sectors, such as engineering and digital. These areas address critical skills shortages that underpin multiple sectors in the eight priority areas, ensuring that courses most aligned with economic growth receive enhanced funding support.

Performance Measures and Outcomes

Skills Shortage Targets

Currently, 10% of businesses report at least one skills shortage vacancy, while only 9% of Secondary vocational learners are studying in the in-demand sectors of engineering, manufacturing, and construction, compared to the OECD average of 32%. The strategy aims to support an additional 65,000 16-19 year-olds in England by 2028-29, including providing key pathways into priority occupations in the eight sectors.

Employment Outcomes

The government maintains a long-term ambition of 80% employment, supported by 634 Jobcentres across Britain and the new Jobs and Careers Service in England. The Youth Guarantee ensures every young person aged 18-21 has access to further learning and help to get a job or apprenticeship, while Inactivity Trailblazers test ways to reduce economic inactivity and develop joined-up offers of local health, employment, and skills support.

Sector-Specific Targets

The nuclear sector alone is projected to support around 120,000 jobs by the early 2030s, while various other sector-specific employment and skills targets are embedded throughout the eight priority sectors. These targets reflect the scale of ambition for job creation and skills development across the Industrial Strategy.

Implementation Timeline

The strategy follows a phased implementation approach beginning immediately in 2025 with the TechFirst package launch and the introduction of shorter duration apprenticeships in August 2025. The Business Growth Service will launch in summer 2025, providing improved digital interfaces for business support.

In 2026, Growth and Skills Levy short courses will begin in April, while Strategic Sites Accelerator funding starts in the 2026/27 financial year alongside Skills Mission Fund implementation. The crucial Lifelong Learning Entitlement launches in January 2027, representing a significant milestone in adult education reform.

By 2028-29, the full £1.2 billion additional annual skills investment will be operational, supporting 65,000 additional 16-19 year-olds in England and delivering on the comprehensive skills transformation outlined in the Industrial Strategy.

This extensive focus on further education and skills development demonstrates the government’s recognition that workforce capability is fundamental to economic growth and competitiveness in the eight priority sectors that will drive the UK’s economic future.