The Building Engineering Services Association (BESA) says last week’s Budget was “not a good one for large employers involved in apprenticeships”.
While Chancellor Rachel Reeves did make some positive announcements, including fully funding under-25 apprenticeships for SMEs; the increase in the minimum wage, a reduction in the number and range of apprenticeships available and speeding up the withdrawal of levy funding were all negatives, the Association said.
“It was a really mixed bag,” said BESA’s director of competence and compliance Jill Nicholls. “Our large members will be affected quite significantly for the worse, but SMEs have an opportunity to start engaging with apprenticeships and can take advantage of some new incentives.
“However, a lot of employers were already reducing their intake because of rising employment costs before the Budget, so the increase in the minimum wage will simply exacerbate an already worrying situation,” said Nicholls.
Minimum hourly rates will rise from April 1 next year by 6% for 16–17 year-olds to £8, for 18-20 year-olds by 8.5% to £10.85, and for 21-year-olds and over by 4.1% to £12.71. The minimum hourly rate for apprentices will also rise by 6% from £7.55 to £8. These follow the increases introduced last year alongside a significant rise in employers' National Insurance contributions.
Use it or lose it
The Chancellor also announced that unused apprenticeship levy funding would expire after 12 months and return to the Treasury’s coffers – so employers would have to “use it fast or lose it”, BESA warned.
This is part of the government’s wider plan to reform apprenticeships and the Growth and Skills Levy, with the intention of increasing flexibility and availably of funds for apprenticeships and broader skills training.
It wants to simplify the apprenticeship system and make it more efficient as short courses are introduced from April 2026. Apprenticeship Assessment Plans will be reviewed for all occupations and the suite of apprenticeship standards available will be streamlined. This will lead to some occupations being removed completely, impacting the competency frameworks explained, Nicholls.
She did welcome the decision to fully fund under-25 apprenticeships for SMEs (employers currently pay 5% of the cost) and reduce national insurance contributions for this age group. There are also new incentive payments for companies who take on young apprentices aged 16-18 as part of the government's strategy to get more NEETs (young people not in education, employment or training) into the workforce.
The Chancellor also announced £1.5 billion worth of support for NEETs through the Youth Guarantee and the Growth and Skills Levy, designed to give all young people aged 16-24 years old access to the support they need to earn or learn.
The government will guarantee a six-month paid work placement for every eligible 18-21 year old who has been on Universal Credit and looking for work for 18 months. This will cover 100% of employment costs for 25 hours a week at the relevant minimum wage, and additional wraparound support.
“So, it was good news if you are in the NEET bracket or an employer willing to take on a young person, but we have a bigger problem with apprenticeships across construction and the built environment where employers are grappling with major increases in their costs," said Nicholls.
“This is a technical industry that needs a steady flow of people trained to a high standard to meet the competence levels against which we are (rightly) being measured. This requires a robust, well-financed and wide-based apprenticeship system supported by employers who have the confidence to invest in emerging talent because they can see a clear growth pathway ahead,” she added.
“In that sense, the Budget was something of a disappointment for many BESA members.”
For help with apprenticeships and other skills issues contact BESA’s Skills Advisory Service here.
www.theBESA.com