Budget 2025: What You Need to Know About Apprenticeships

Budget 2025: What You Need to Know About Apprenticeships
Much of the press coverage of last month’s budget focused on the perception that the Government was returning to the public “cap in hand” to bolster public finances. In doing so, some of the details around skills, apprenticeships, and employer funding were easy to overlook. Here’s our take:

Youth Guarantee
The Youth Guarantee has been allocated £820 million, including £425 million of new funding. The scheme offers a six-month paid placement for 18–21-year-olds who have been on Universal Credit for at least six months.

Our Take:
As highlighted by many in our sector, the funding would cover just over 1 in 10 young people who are not in education, employment, or training (NEETs): there are currently approximately one million in this category.

Nonetheless, the support for young people and, crucially, for the employers who hire them, could translate into more meaningful jobs. In our experience with the public sector in London, employers are keen to take on young people in the community but face challenges related to the higher costs of training and integration. This funding could be a welcome boost, particularly if it is paired with government-funded apprenticeships at the end of the six-month period, giving employers an incentive to invest in these individuals long-term.

Apprenticeships
There are several notable changes:

  • Programme Budget Increase: An extra £725 million will be added over the next three years, approximately £242 million per year.
  • No More Levy Top-Ups: The 10% uplift for levy-paying employers introduced in 2017 will be removed.
  • Levy Funds Expire Sooner: From 1 April 2026, levy funds will expire after 12 months instead of 24.
  • Levy-Payer Co-Investment Rises: Once a levy payer exhausts their account, co-investment will move to a 75:25 split, meaning employers will contribute more.
  • Fully Funded Apprenticeships for SMEs (under 25s): SMEs can now access full funding for apprentices aged 25 and under, up from under 22.
  • Streamlining Apprenticeship Standards: In line with previous announcements on the Growth and Skills Levy, some standards can be simplified into modular units.

Our Take:
A trend we’ve observed, particularly in the public sector, is that underspent levy funds have created a culture where levy-paying employers are willing to transfer funds to smaller organisations (for example, an NHS Trust transferring to a GP practice).

With the introduction of the Growth and Skills Levy and the option for organisations to spend 50% of their levy on modular courses, a concern for smaller organisations is whether levy transfers will become less available. Larger employers may be less willing to transfer funds if they believe they can now spend the levy on programmes that better meet their needs.

This risk may be compounded by two factors:

  1. The removal of the top-up effectively reduces spending power.
  2. Levy-paying employers will have to contribute 25% of costs once their levy account is exhausted.

It appears the Government is aware of these potential implications and is balancing them with funding incentives for apprentices under 25 and reductions in the time large employers can hold levy funds.

While the focus on young apprentices and the message of urgency is welcome, the complexity of apprenticeship funding and levy transfer processes remains. These new initiatives may inadvertently make larger employers more cautious about transferring funds, potentially limiting the impact of the reforms.

Conclusion
The budget brings meaningful investment and some promising steps, particularly for young people and SMEs. However, the reforms also introduce new pressures for larger levy-paying employers, which may affect how widely levy funds circulate through the system. As ever, the impact will depend on how these changes play out in practice and whether employers feel confident navigating a landscape that continues to shift. For now, the message is clear: opportunities are growing, but so are the decisions employers need to make to use their funding effectively.