What do the latest reforms in Apprenticeships and the Growth and Skills Levy mean for people professionals?

Funding matters, but it’s not the main barrier

Apprenticeship starts have been falling for years. This decline has restricted opportunities for young people and made it more difficult for organisations to build the talent pipelines they need.

The creation of 50,000 new apprenticeships, coupled with a stronger role for mayors in connecting young people with employers, is a positive step. And in a year when employment costs continue to rise, fully funding apprenticeship starts for under-25s in SMEs will be welcome relief.

But we should not pretend that removing the employer contribution will transform participation. Cost is rarely the main barrier for smaller employers. The real challenges lie elsewhere, and unless we address these practical constraints, take-up among SMEs will remain limited. This is why direct support, such as wage grants, would be far more effective at stimulating demand, especially from employers considering taking on young people for the first time.

Why are apprenticeships changing again?

The skills landscape in England is shifting once again. Since Labour took office, apprenticeships and workforce development have re-entered the centre of policy discussions, with the establishment of Skills England and the transition from the apprenticeship levy to the new Growth and Skills Levy. The reform agenda aims to support productivity and economic growth by introducing a more flexible and employer-responsive skills system.

However, despite the flurry of announcements, much remains unclear. Operational details, including how modular provision will function in practice, how funding rates will be set, and how quality assurance will operate under the new arrangements, are yet to be confirmed.  Further detail is expected through additional guidance and a more detailed Growth and Skills Levy ‘offer’ during 2026, but at the time of writing many aspects of implementation have not yet been set out in full.

Recent announcements, including those set out in Budget 2025, have begun to establish the direction of travel. While many of the changes aim to remove long-standing barriers to participation and delivery, they also introduce new pressures and raise important questions about quality, coherence and long-term impact of apprenticeships - all of which people professionals will need to navigate carefully.

What’s already changing? (pre-Budget apprenticeship reforms)

Before the Budget, the UK Government had already begun implementing a series of reforms designed to increase flexibility and reduce administrative burden:

• Shorter minimum apprenticeship durations
  Some standards can now be delivered in under 12 months - in some cases as little as eight - allowing faster responses to shifting skills needs.
• Changes to end-point assessment (EPA)
  Assessment requirements have been simplified, with greater flexibility in EPA design and delivery (including increased scope for remote assessment and streamlined processes), aiming to reduce bureaucracy while maintaining external assessment.
• Removal of mandatory Level 2 maths and English for adult apprentices
  Adult learners no longer need to achieve GCSE-equivalent maths and English to complete an apprenticeship. While this reduces barriers to completion, it also raises concerns about the loss of essential transferable skills.
• January 2026 – withdrawal of public funding for most Level 7 apprenticeships for over-22 new starters
  Funding will be refocused away from masters-level apprenticeships, shifting the overall balance of levy investment toward entry and intermediate occupational routes.

Budget 2025: how will the Growth and Skills Levy work?

The Budget 2025 confirmed how the Growth and Skills Levy will operate from April 2026, alongside formalising some existing temporary arrangements:

• Continued SME co-investment waiver for under-25s
  The UK Government will maintain the policy of covering the 5% employer contribution for SMEs employing apprentices under 25, embedding earlier temporary support within the reformed levy framework.
• Levy fund expiry reduced to 12 months
  Levy-paying employers will have one year rather than two to use their digital funds before they expire.
• Removal of the 10% levy top-up
  Employers will no longer receive the automatic 10% government uplift on levy account funds, reducing the real spending power of their contributions.
• Employer co-investment increases to 25% once levy funds are exhausted
  After levy balances are used, employers must directly fund a quarter of training costs, potentially increasing their financial cost in apprenticeship delivery for some larger employers.
• Introduction of modular ‘apprenticeship units’
  Levy funding will become available for shorter units of training in addition to full apprenticeship standards. The first wave of units will be aligned to nationally critical skills priorities including digital, AI and engineering, with wider expansion expected over time.

What are the key issues employers should prepare for?

Many of these reforms make sense individually: shorter durations and modular options should help keep pace with fast-changing skills needs; simplifying assessment should reduce bureaucracy; and shifting funding away from Level 7 aligns with a policy choice to refocus public spending on entry-level and intermediate occupational skills rather than advanced professional qualifications.

But together they create new tensions, particularly around employer behaviour and quality.

SME participation barriers remain unchanged

The continued removal of SME co-investment has been framed as a way to support participation. But evidence suggests that cost is rarely the main barrier for small employers. Bigger challenges include:

• finding time for staff to do off-the-job training,
• the limited fit between apprenticeship standards and the multi-role nature of jobs in smaller organisations
• limited people-management capacity to effectively support learners

Unless these issues are addressed, financial incentives alone are unlikely to drive a substantial increase in SME engagement.

Large employers face tighter planning cycles

For large levy-paying employers, the biggest change will be the reduction of the levy expiry period to 12 months from April 2026. This will reduce planning flexibility and may lead to more reactive commissioning, where training is chosen to avoid losing funds rather than to meet genuine workforce needs. While co-investment will rise to 25% beyond levy balances, in practice this change is unlikely to affect most large employers, as many do not fully use the levy funds available in their digital accounts. Its impact, therefore, will be concentrated among a relatively small group of very high-volume users of apprenticeships rather than representing a system-wide cost increase for large firms. In addition, the removal of the 10% levy top-up will also slightly reduce the real value of levy funds available to employers, slightly tightening the funding environment even before organisations move into co-investment.

Quality concerns across the whole reform programme

Across the reform programme, quality remains a major concern.

Key risks include:

• Shorter apprenticeships reducing learning time.
• Changes to EPA that simplify processes but, if not carefully managed, may weaken assessment rigour or blur the boundary between training and independent judgement, particularly where assessment increasingly relies on employer-generated evidence.
• Removing mandatory maths and English requirements, which may improve completion rates but risks undermining the development of core foundation skills essential for progression and long-term employability.

Together, these shifts place greater emphasis on employer and provider choices - what training is commissioned, how standards are interpreted, how apprentices are supported, and how quality is assured at workplace level.