UK SMEs May Abandon Apprenticeships Amid Economic Strain, Experts Warn
Small and medium-sized enterprises (SMEs) in the United Kingdom are preparing for additional economic challenges, with many struggling to finance apprenticeship programs. This situation poses a significant threat to the skills development necessary for driving economic growth, according to recent warnings from industry experts.
Economic Shocks and Apprenticeship Declines
Skills charity Enginuity, formerly the sector skills council for engineering and manufacturing, has highlighted these concerns in its latest Skills Snapshot report. The findings, compiled before recent geopolitical conflicts, indicate a worrying trend. Government data released last week shows that apprenticeship starts for individuals under 19 have dropped to their lowest level in five years. Concurrently, the Organisation for Economic Co-operation and Development (OECD) has revised growth forecasts downward, suggesting the UK could be among the hardest-hit nations economically due to ongoing wars.
Enginuity warns that some sectors may have already reached a critical tipping point, despite recent government initiatives offering financial incentives to support businesses and ensure employment or training for young people. The charity reveals that the total cost of employing an engineering apprentice can surpass £157,000 over a three-year program, a substantial burden for many SMEs.
Survey Insights and Business Pressures
The Policy Centre for Supply Chain and SMEs, established to advocate for smaller companies, commissioned the research and plans to urgently communicate these stark warnings to government officials. Key survey results from over 250 companies, which collectively employ 10,000 people and contribute £1.9 billion to the UK economy, include:
- 25% of respondents do not employ any apprentices at all.
- 84% identified labour costs as the primary factor driving price increases, followed by energy and utility costs at 61%, and raw materials at 61%.
- More than 60% expressed pessimism about the year ahead in January 2026, even before recent conflicts escalated.
- 60% cited a lack of technical qualifications as a major recruitment challenge.
SMEs are crucial to the UK economy, representing over 99% of all businesses and more than 95% of the manufacturing and engineering sector. Their struggles could have widespread implications for national skills provision.
Industry Voices and Rising Costs
Ann Watson, CEO of Enginuity, commented on the situation, stating, "It is a mixed picture, but for many in the sector the situation was bad to begin with, and it has got a whole lot worse in recent weeks. The current energy crisis due to war in the Middle East is piling yet more economic pressure. With 25% of respondents not employing any apprentices at all, and others telling us that they may stop employing them, this could prove disastrous for the skills system in the UK."
Chris Houston, Managing Director of Tadweld, a leading steel fabrication and engineering company, explained the financial challenges. "In 2023, the minimum wage for an apprentice welder was £6 per hour. While that may seem low, apprentices attend college one day per week, and we pay them for that time too. They are in training for most of the time they are with us, working alongside a skilled fabricator, so we have always seen apprentices as an investment rather than an employee able to produce high volumes of work. In 2024, the apprentice National Living Wage increased to £7.50 per hour, and then in 2025 it rose to £10 per hour. That is a staggering 66% increase in two years. It makes offering apprenticeships exceptionally expensive."
As SMEs navigate these economic headwinds, the future of apprenticeship programs hangs in the balance, potentially undermining the UK's long-term skills development and economic resilience.
