Government pledges £725m apprenticeship overhaul for SMEs

The government has unveiled a £725 million overhaul of the apprenticeship system, promising 50,000 new opportunities for young people and full training-cost coverage for small businesses.

Under the reforms, announced on 8 December 2025, ministers said the plan will “transform access to skilled work” for under-25s and reduce the number of young people not in education, employment or training. The package includes the launch of new “foundation apprenticeships” in retail, hospitality, and engineering, alongside a Level 4 apprenticeship in artificial intelligence to meet the demand for emerging-tech skills.

For small and medium-sized enterprises (SMEs), the government said it will fully fund the cost of apprenticeship training for workers aged under 25 — removing the 5 per cent co-investment that smaller employers previously contributed. A £140 million local pilot will also enable regional mayors and councils to connect NEET young people with apprenticeship and employment pathways.

Education Secretary Gillian Keegan said the measures “mark a step change in the way we support both young people and employers,” adding that apprenticeships should be “treated with the same respect as degrees.” She said the reforms were designed to “help SMEs grow while giving young people a real alternative to university.”

Sector bodies welcomed the focus on youth skills, though industry groups have questioned whether the package goes far enough to ease the financial strain for small employers.

Zamiha Desai MBE, founder of the business networks ProfessionalAsian and RecommendAsian — whose combined reach spans almost 200,000 SMEs and consumers — said that while the funding will help some, “for most SMEs, it still doesn’t go far enough.”

“As small business owners, we know the reality. Even with training costs covered, an apprentice is still a £12,000-plus per year commitment, plus the time we spend supervising, mentoring, and absorbing the early productivity dip,” she said. “Apprenticeships can be powerful for social mobility. As a parent, I welcome anything that opens doors for young people. As an SME founder, when apprenticeships work well, they’re great — but the outcomes are inconsistent.”

Desai pointed to government data showing that only half of apprentices complete their programmes, and among those who do, just 60 per cent stay on with their employer. “Many small businesses invest months into training with no long-term return,” she added.

“SMEs run incredibly lean teams. Losing a day to paperwork, compliance or training-provider admin has a real operational cost. And not all training providers deliver the specialist support businesses are promised — yet, for example, in digital marketing, they still receive up to £11,000 in government funding per apprentice, even when outcomes aren’t strong,” she said. “So while today’s announcement will help some, it isn’t the transformative fix SMEs need.”

Analysts have noted that while the reforms remove one major barrier — training fees — they do not address wage subsidies or the wider employer costs of supervision, onboarding, and reduced productivity during the early stages of employment.

The reforms are part of the government’s broader “Get Britain Working” initiative, which aims to boost employment participation, expand regional skills hubs, and reduce reliance on overseas labour. Implementation is expected to begin in April 2026, with further guidance for employers due early next year.