The Budget must back the skills Britain needs to grow

Next week’s Budget will reveal whether the Government is prepared to invest in the skills needed to deliver its growth ambitions. New homes need construction workers. Clean energy needs engineers and electricians. Businesses adopting AI need people who can turn technology into higher productivity. None of these aims can be delivered without sustainable investment in skills.

Yet the evidence exposes a damaging disconnect. In 2024, 27% of UK vacancies were difficult to fill because applicants lacked the required skills, qualifications or experience. Meanwhile, an estimated 981,000 young people were not in education, employment or training (NEET) in April to June 2026. Employers struggling to recruit and young people struggling to find a foothold are two sides of a problem that better skills policy must help resolve.

AELP’s Treasury submission starts with a simple reality: every apprenticeship depends on an employer deciding to create that opportunity. Government can make that decision easier through certainty, affordability and practical support. Equally, it can discourage investment through complexity, unpredictable funding and additional costs.

Our members deliver six in ten apprenticeships in England and work with employers across the country. Their experience shows why the Budget must make investing in skills easier and more affordable.

We have made a dozen recommendations to the Chancellor ahead of his first budget on 28 October. These are:

Increase the apprenticeship budget in line with employer levy contributions to ensure sufficient funding is available for apprenticeships, Foundation Apprenticeships and future Growth and Skills Levy flexibilities.
Increase apprenticeship funding bands annually in line with inflation and introduce a more responsive review process that reflects the true costs of delivery.
Introduce a dedicated apprenticeship budget for SMEs to provide certainty for employers and support increased participation from smaller businesses.
Introduce further targeted employer incentive payments for recruiting apprentices aged 16-24, with additional support available for young people who face barriers to employment, including those with SEND.
Expand Foundation Apprenticeships and other progression pathways that help more young people move successfully into apprenticeships, employment and higher-level technical training.
Create a flexible skills entitlement that gives individuals access to apprenticeships, short courses, modular training and qualifications from the age of 16 throughout their careers.
Introduce a national framework for measuring the economic and social returns generated through public investment in skills and workforce development.
Double investment in the Adult Skills Fund to support retraining, address skills shortages and help deliver the Government's growth mission.
Allow all high-performing 16-19 providers to grow in response to learner demand by removing arbitrary growth caps and ensuring funding follows the learner.
Open all further education capital investment funds to independent training providers and other organisations delivering publicly funded technical education and apprenticeships.
Deliver skills devolution through multi-year funding settlements and greater local flexibility, while maintaining national entitlements, learner choice, employer choice and provider access across devolved boundaries. Learners are provider neutral, therefore devolution should ensure all provider types are anchor organisations.
Expand the use of Lifelong Learning Accounts to give learners greater ownership of their skills development and support lifelong participation in education and training, at all levels, not just for the LLE.

Invest the money employers already contribute

Apprenticeship demand is growing. Provisional figures show 308,770 apprenticeship starts in England between August 2025 and April 2026, up 8.7% on the same period a year earlier, while achievements increased by 14%. This is progress we should build on.

Yet earlier this year, FE Week estimated that around £780 million raised through the levy would not be spent on apprenticeships in England in 2025/26, after accounting for allocations to the devolved nations. With demand increasing and the apprenticeship budget under pressure, retaining money raised for skills risks undermining employers’ confidence in the system. They should be able to see their contributions supporting the training they and the wider economy need.

Funding must also keep pace with the cost of delivery. Frozen apprenticeship funding bands leave providers trying to absorb rising wages, equipment costs and other expenses, weakening their capacity to meet employer demand. Annual increases in line with inflation, alongside faster funding reviews that reflect the true costs of training, would give employers and providers greater confidence to plan.

Create more opportunities for young people

The headline growth in apprenticeships conceals a worrying trend: under-19 starts fell by 5.4% to 63,530 over the same period. That demands action, including targeted recruitment incentives, stronger support for young people facing additional barriers, and wider Foundation Apprenticeship pathways.

Small and medium-sized enterprises (SMEs) must be central to this effort. They employ 60% of the private-sector workforce, so a skills strategy that fails to reach them risks leaving a significant part of the economy behind. A dedicated apprenticeship budget would give smaller employers confidence that funding will be available. But they also need practical support to navigate the system, from their first enquiry through to successful completion. Funding training providers for the additional work involved in engaging and supporting SMEs would help more small firms turn interest in apprenticeships into recruitment opportunities.

The Budget should also remove arbitrary growth caps that prevent high-performing independent training providers from responding to demand for 16-19 provision. When a young person is ready to re-engage with education or training, the system should make a suitable place available.

Growth needs adults’ skills too

But while greater investment in young people is essential, it cannot come at the expense of older workers in need of training and retraining. DfE figures show that adult participation in regulated English fell by 25.7% and maths by 23.4% between 2021/22 and 2024/25, narrowing access to essential skills that underpin progression in learning and work. Funding more opportunities for the young by further restricting adults’ opportunities would undermine the same growth mission.

71% of the workforce of 2035 is already in the labour market. Across Level 2 and Level 3 apprenticeships, 44% of starts are by people aged 25 and over. In transport, the proportion is around two thirds – in social care, that rises to 82% of Level 2 and Level 3 starts.

Adults already in work will have to deliver much of the technological and industrial change the Government wants to see. Their ability to retrain, progress and adapt matters to businesses and to the young people seeking jobs within them.

The Institute for Fiscal Studies puts public spending on adult education and skills in England at around £4.7 billion in 2024/25, approximately 30% below its inflation-adjusted 2003/04 peak. That long decline strengthens the case for AELP’s call to double the Adult Skills Fund and create a flexible skills entitlement throughout working life.

Build a system that can deliver

Devolution can help connect investment with local needs, provided authorities receive multi-year settlements and meaningful flexibility. Apprenticeships should remain national and employer-led, with learner and employer choice protected across boundaries.

Public investment must also follow quality and need. Independent providers delivering technical skills should have fair access to capital funding for industry-standard facilities and equipment.

The Treasury should measure success through sustained employment, earnings, productivity and progression. The Budget’s test is whether it enables more employers to invest and more people to succeed. Backing skills properly would give the Government a practical route to the growth and opportunity it has promised.

You can read the AELP’s full submission to the Chancellor ahead of his Budget on 28 October here.

The Association of Employment and Learning Providers (AELP) is a national membership body, proudly representing organisations operating in the skills sector. AELP members deliver a range of training and vocational learning – including the majority of apprenticeships as well as Skills Bootcamps, 16-19 Study Programme, Adult Education Budget and more.

For further information or interviews please contact Matt Strong, Head of External Communications, AELP, on 07920 161685 or [email protected]