Apprenticeship and Skills & Growth reforms explained: What does it mean for employers?
The UK apprenticeship system is undergoing its biggest reform in a decade. From 2026, the Apprenticeship Levy will transition into the Growth and Skills Levy, bringing changes to who apprenticeships are for, what levy funds can be used for, and how training and assessment work in practice.
These reforms represent a clear shift in government priorities, with implications for workforce planning, social value commitments, procurement, and skills investment across the economy.
Why the government is reforming apprenticeships now?
The Labour Government has been clear that the current system is no longer fit for purpose. Three main pressures have driven the timing and direction of reform:
Renewed focus on young people
Apprenticeship starts among younger learners have fallen by around 40 percent over the past decade, while almost one million 16 to 24-year-olds are not in education, employment or training (NEET). Ministers want the system to pivot back towards school and college leavers, rather than being used primarily to upskill older workers who already hold high levels of prior learning.
Industrial Strategy
The skills system is being reshaped to address shortages in high-growth and strategically important sectors such as artificial intelligence, green energy including solar and EV charging, and construction highlighted within the government’s new Industrial Strategy. Apprenticeships are being repositioned as a tool for economic growth, productivity and future-facing skills.
Simplification
The system had become overly complex. With more than 700 apprenticeship standards, employers and providers have consistently described the current model as burdensome, time-consuming and difficult to navigate. Simplifying funding, reducing bureaucracy and streamlining assessment are central aims of the new approach.
From the Apprenticeship Levy to the Growth and Skills Levy
The Apprenticeship Levy was introduced in 2017 as a mandatory tax on employers with an annual pay bill over £3 million. Set at 0.5% of payroll, levy funds are held in digital accounts and used to pay for apprenticeship training and assessment.
From 2026, this system begins its transition into the Growth and Skills Levy. While the core levy mechanism remains, the new model is designed to be more flexible and more tightly aligned to labour market need. Oversight of the levy and approval of standards has moved from the Institute for Apprenticeships and Technical Education to a new body, Skills England.
At its heart, the Growth and Skills Levy is about directing public investment towards young people and critical skills, while giving employers greater flexibility over how they use their funds.
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The reforms are being introduced in stages throughout 2026, with each milestone bringing practical implications for employers.
Since Aug 2025:
8-month apprenticeships: The minimum duration of an apprenticeship was reduced from 12 to 8 months, only for courses where its appropriate.
Since Jan 2026:
Level 7 Restrictions: Public funding for Level 7 (Master's level) apprenticeships has been removed for most people aged 22 and over.
From Apr 2026:
Skills and Growth Levy Launched.
Apprenticeship Units: Employers will be able to fund new short, flexible training units with their levy in areas such as AI, engineering and construction.
Foundation Apprenticeships: Three new Level 2 apprenticeships will be available bringing the total to seven. Employers can receive up to £2,000 to help with the costs of taking on a young person for a foundation apprenticeship and supporting their progression.
From Aug 2026:
Removal of Government Top-up: The current 10% government top-up on monthly levy contributions will stop.
Shortened Expiry Period: New funds entering an account will expire after just 12 months if unused, a reduction from the previous 24-month window.
Increased Co-investment for Large Employers: For levy-paying employers who exhaust their funds, the "co-investment" rate (the portion they must pay for additional training) will rise from 5% to 25%.
Full Funding for SMEs: The government will fully fund apprenticeship training for under-25s at non-levy-paying businesses (mostly SMEs), removing the requirement for them to contribute toward training costs or the need to cover costs via levy gifting.
From Sep 2026:
Defunding standards: Funding will be withdrawn from 16 apprenticeship standards. This includes popular management courses like the Level 3 Team Leader and Level 6 Chartered Manager. This is because the government wants to focus the apprenticeship offer on young people and critical skills gaps. Ministers were concerned that these courses were used more to upskill existing staff, than for young people entering the workforce.
From Oct 2026
Incentives for SMEs: Non-levy paying employers (typically SMEs) will be able to get an incentive of up to £2,000 when recruiting new apprentices aged 16 to 24.
Changes to apprenticeship assessment are being introduced alongside these funding reforms. End-point assessment is being rebranded as apprenticeship assessment, and assessment can now take place throughout the programme rather than as a single high-stakes event at the end. Independent assessment of professional behaviours is being removed, with employers now responsible for internally verifying that an apprentice has demonstrated the required behaviours before completion. Assessment Organisations continue to design assessment materials and assure quality but are expected to work more closely with employers to reflect occupational reality.
There are also changes to English and maths requirements. For adult apprentices aged 19 and over, achieving separate English and maths qualifications is no longer mandatory. Instead, these skills can be demonstrated through real work tasks.
What this means in practice for employers
New opportunities
For levy-paying employers, the most immediate benefit is greater flexibility. Apprenticeship units allow organisations to address specific skills gaps quickly, without the cost or commitment of a traditional 12-month apprenticeship. This makes it easier to respond to changing skills needs, particularly in fast-moving sectors such as AI, construction and engineering.
It is also important to note that apprenticeships have not become age-restricted across the board. Many traditional standards remain available to learners of any age, including newer programmes such as the Level 4 AI and automation practitioner. Employers can still use apprenticeships to build capability where there is a clear occupational need.
Some challenges or changes to how apprenticeships operate
Employers now play a much greater role in assuring quality, particularly through the internal verification of professional behaviours. This places more emphasis on effective line management, robust evidence gathering and closer working relationships with Assessment Organisations.
The funding changes also increases the need for strategic planning. The removal of the government top-up, shorter expiry periods for levy funds and higher co-investment rates mean that levy planning needs to be more deliberate and closely monitored than before.
Some organisations will also lose access to standards they previously relied on to upskill existing staff, particularly in management and leadership. While existing apprentices will continue to be funded through to completion, employers may need to consider whether to self-fund training where it remains business critical.
Social value and procurement considerations
For procurement and bid-writing teams, staying up to date with the reforms is essential to ensuring that social value commitments are realistic, deliverable and optimised by the changes. Consider the following:
Are there new apprenticeship standards or apprenticeship units relevant to your business which could form new commitments?
Is your current apprenticeship offering at risk based on the reforms? Are any standards you rely on going to be defunded?
Have you costed employing apprentices correctly? Have the new apprentice wage rates been used? Are you confident levy funding is available where assumed?
The reforms also require a rethink of levy transfers as a social value mechanism. Under the previous system, large employers could transfer up to 50 percent of their levy funds to SMEs, charities or flexi-job agencies. From August 2026, however, the government will fully fund apprenticeship training for under-25s employed by non-levy-paying SMEs. As a result, the need for levy gifting or transfers is significantly reduced. Organisations that have previously committed to levy transfers as part of their social value offer should review those commitments carefully and consider whether alternative, more appropriate skills or employment interventions are now required.
“Given the scale of reforms and the likelihood of further change, we would also recommend including apprenticeship standards reform as a specific risk within bid risk registers, particularly for longer-term contracts. ”
What’s Next?
Visit our Apprenticeship & Skills resource page here
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