Business groups warn 25% fee hike for older apprentices

The UK government is preparing to alter the funding structure for apprenticeships in England. The change would increase the financial burden on companies training workers over the age of 25.

Under the proposal, which is expected to be part of the response to the Milburn review on youth unemployment, employers would face a 25% cost increase for older trainees. Currently, businesses can use their full contribution to the growth and skills levy to fund any apprentice. The new rule would require firms to cover 25% of the cost for workers over 25 out of pocket, while levy funds would only cover 75%. This shift aims to steer resources toward younger entrants, as those over 25 currently account for more than half of new apprenticeship starts.

Robert Halfon, executive director of policy at Make UK, told the government that the plan shifts opportunities rather than creating them. He stated, “We agree that getting young people back into employment and training is a moral and economic imperative. But making it more expensive for employers to train older workers isn’t the answer.” Halfon urged Chancellor John Healey to use the upcoming budget to expand the total number of apprenticeships instead of restricting training for adults.

John Foster, chief policy and campaigns officer at the CBI, cautioned against treating skills development as a zero-sum game. He noted that adult training remains vital for mid-career skill updates, particularly as artificial intelligence reshapes job roles. Ben Rowland, chief executive of the Association of Employment and Learning Providers, added that any changes must be gradual to avoid disrupting the system.

The debate comes as the Labour government seeks to reverse a 40% drop in youth apprenticeship starts over the past decade. Andy Burnham has made youth employment a central focus of his agenda. Ministers aim to enroll 30,000 young people in foundation apprenticeships during the current parliament, though only 160 were enrolled in the first eight months of the scheme.

A government spokesperson said the reform is backed by £3.3bn to deliver 50,000 additional apprenticeships for young people. The package includes a new hiring payment of £2,000 for small and medium-sized enterprises that take on a 16- to 24-year-old apprentice. The Milburn Review is due in the autumn, and the government said it would not pre-empt the findings.

Business leaders are also urging the Treasury to provide relief from soaring costs linked to the war in the Middle East. They have asked the chancellor to avoid adding pressure on firms following recent increases in employer national insurance contributions.