A skills crisis we can fix: Why apprenticeships must be a national priority

A thriving economy isn’t only built on innovation and money – it’s built on people with the training, confidence and capabilities to contribute significantly to work and society.

But across the country, a gap is opening up. Employers are struggling to fill vacancies in key sectors, while thousands of young people are being excluded from the labour market.

As of late 2024, more than 750,000 young people aged 16–24 were classified as economically inactive – not in education, employment or training (NEET), according to the Office for National Statistics (ONS). At the same time, a fifth of employers indicate there are critical skills shortages in their current workforce, with the construction, health and social care and digital sectors among the worst hit.

This disconnect isn’t due to a lack of ambition or ability among young people – it comes down to a lack of access to the right opportunities.

This is where apprenticeships must take centre stage. As a bridge between education and employment, they offer a practical and effective solution to some of the most urgent labour market challenges we’re seeing at the moment.

The undervalued apprenticeship model

Despite repeated recognition of their value, apprenticeships remain widely underutilised. Between 2015–2016 and 2022–2023, total apprenticeship starts in England fell by more than 30 percent, from nearly 500,000 to just 337,140. This fall reflects systemic problems: confusion around the apprenticeship levy, underfunded training providers and persistent inequalities in access.

Small and medium-sized enterprises (SMEs) – which employ 60 percent of the private sector workforce — are finding it hard to access the current system. A mere 11 percent of SMEs employed an apprentice in the last 12 months, as they are put off by costs and administrative complexity.

Meanwhile, disadvantaged young people remain in the minority to take up apprenticeships. Evidence released by the Social Mobility Commission reveals that people who live in the most deprived parts of England are 37 percent less likely to pursue a higher-level apprenticeship compared to those living in more privileged areas.

This underinvestment and underrepresentation represent a missed opportunity, not only for individuals, but also for the broader economy. In sectors like health and care, where over 10 percent of posts are vacant, or in digital tech, where over 80 percent of businesses recognise a digital skills gap, apprenticeships can and should be a key part of the solution.

A call for focused investment and change

For the full potential of apprenticeships to be realised, the next tax year will need to bring targeted investment and policy change. This involves enhanced funding assistance to SMEs.

Cost and bureaucracy are frequently cited by smaller employers as barriers to engagement, and tax relief, wage subsidy and expert assistance would all make a difference in enabling them to create more apprenticeship placements. Fewer than 20 percent of levy funds for apprenticeships are used by SMEs, suggesting a need for more reasonable frameworks.

We also need to see reform of the apprenticeship levy. While the levy generates around £2.5 billion annually, much of it goes untapped. More flexible models in which money can be used to cover training for a broader range of skills, such as short, modular courses or wraparound support for disadvantaged learners, could greatly increase take-up.

A national access and inclusion strategy is also vital. Apprenticeships must be made available to all, regardless of geography or background. The cost of transport alone is cited by over 40 percent of disadvantaged young people as a main obstacle to apprenticeships. Working to address these issues through specialist support and local access funds would start to even things out.

Finally, collaboration needs to be strengthened across sectors. Employers, training providers, schools and local authorities must collaborate to create clear, visible pathways into apprenticeships. Only 26 per cent of 14–18-year-olds say they have received good-quality advice about apprenticeships – far fewer than for the university route.

A broader vision for economic resilience

The value of apprenticeships goes much further than a temporary labour market fix. They represent an investment in the kind of economy the UK needs to build – one that is productive, inclusive and suitable for the future. As we face a period of rapid technological and environmental change, flexibility is the key.

Apprenticeships provide practical, relevant skills that are an excellent fit for emerging industries. The transition to net-zero in the UK, for example, has the potential to create up to 2 million green jobs by 2030, many of which will not require traditional degrees but will call for specialist technical qualifications – just the kind of training apprenticeships can provide.

Moreover, apprenticeships drive social mobility. Young people who have completed a Level 3 apprenticeship are paid on average 20 percent more than others with similar backgrounds who do not. These are routes not just into employment, but into careers – especially for those that have been poorly served by mainstream education.

Skills have historically been viewed as an afterthought in financial planning. Despite consensus across parties regarding the importance of vocational routes, investment in apprenticeships hasn’t kept up with the level of demand or the extent of the challenge.

The next tax year provides the opportunity to do so. It’s a chance to align fiscal policy with the real needs of the economy: to invest not just in infrastructure or innovation, but in people. It’s a chance to ensure all young people have a real route into work, and that all employers can access the talent they need.

But this will only happen if apprenticeships are prioritised not as a specialist policy drive, but as a national priority.

A matter of national concern

The UK cannot afford to waste potential. The cost of inaction (both human and economic) is too high. An underequipped workforce is a drain on productivity, innovation and competitiveness. A generation being denied access to work is a crisis waiting to happen.

Placing apprenticeships at the top of the agenda in the next tax year would be more than a smart policy gesture – it would be a sign of direction. A direction to invest in young people, support business and create an economy that works for everyone.

The skills economy isn’t a theoretical concept – it’s real life to millions. Now is the time to invest in it.