Enginuity, a leading UK skills body dedicated to closing the skills gap in engineering and manufacturing, is urging the Government to take decisive steps in the Budget to restore the affordability of apprenticeships, or risk reducing growth for good.
Recent years have seen a dramatic decline in apprenticeship starts, with 170,000 fewer places available in 2024 than in 2014.
The former Sector Skills Council, known as the ‘Sector Connector’, Enginuity carries out regular SME Snapshots, monitoring the real-time issues affecting small and medium-sized businesses in engineering and manufacturing.
The latest snapshot showed that the greatest pressure on the bottom line comes from employment costs, with issues on the cost of apprenticeships and recent increases in National Insurance Contributions.
Chief Executive Ann Watson said, "High employment costs are now the largest factor driving inflationary pressures and undermining the UK's labour market. This week’s unemployment figures may well reflect just that.
“The skills system must work for the majority – especially SMEs – who are fighting to survive. When it becomes too expensive to invest in the skills of the future, we jeopardise not only businesses but also the prosperity and innovation of our country."
“This is a direct result of soaring employment costs, including a 66% increase in the National Living Wage for apprentices over just two years, alongside additional increases to National Insurance for the existing workforce.
“It is absolutely right for apprentices to be paid fairly but for the first 18-24 months of the apprenticeship they are effectively in training and the cost differential between an apprentice and some experienced workers is now so small that we may see many employers replacing their normal apprentice intake for those with more experience.
“For small and medium-sized enterprises (SMEs), the backbone of UK manufacturing, these costs have become unsustainable, forcing many to cancel or downsize their apprenticeship programmes.
"The UK has a proud history of apprenticeships dating back to the Statute of Artificers in 1563. These programmes have been integral to the success of industries from engineering and construction to hospitality and healthcare.
"Yet, recent policy decisions—including the 2017 introduction of the Apprenticeship Levy, alongside a national push for university degrees—have had a lasting negative impact.
"While there has been a recent shift in attitudes recognising apprenticeships as a valuable alternative to academic routes, the most recent increases in minimum wage have made it cripplingly expensive for businesses to train apprentices, threatening the future pipeline of skilled workers.
"At Enginuity, we hear daily from SME leaders who are passionate about developing the next generation but are unable to afford it. The cost of employing an apprentice has risen by over 70% when factoring in both wage and the cost to train. For many, this means having to make the difficult decision to suspend programmes that have produced talented professionals for decades. SMEs constitute 90% of UK manufacturing, and if they cannot invest in skills, the competitiveness and resilience of our industry is at risk.
"With demand for skilled roles, such as welders, set to rise sharply in the next five years, but with just 231 welding apprentices trained in 2024, the current trajectory is not sustainable. We must act now. The upcoming budget presents a vital opportunity for Government to support UK industry by making apprenticeships affordable once again.
"Enginuity, alongside partners across the manufacturing sector, calls on policymakers to review employment costs and ensure that SMEs can continue to invest in talent and training. Only by prioritising apprenticeships can we secure the future of British industry and provide meaningful opportunities for young people."
