SMEs may turn back on apprenticeships, economic ‘shock and war’ disrupts skills provision
The UK’s small and medium sized businesses (SMEs) are bracing themselves for further economic shocks in the pipeline and are already struggling to fund apprenticeships – which threatens the skills provision required to power growth.
Skills charity Enginuity, the former sector skills council dedicated to boosting skills provision in engineering and manufacturing, issued the warning as it released the results of its regular Skills Snapshot, compiled before the outbreak of war – and details of discussions held since.
Government figures issued last week reveal that Under 19 apprenticeship starts have fallen to their lowest level in 5 years and the OECD (The Organisation for Economic Co-operation & Development), has downgraded growth forecasts and suggests that the UK would be worst hit among leading nations, by the economic fallout of the war.
Enginuity is worried that for some sector businesses a crucial ‘tipping point’ may have already been reached, despite recent government announcements providing additional financial incentives to ease the business burden and guarantee young people employment or training.
The charity has revealed that the true cost of employing an engineering apprentice can be more than £157,000 during the three-year programme.
Their Policy Centre for Supply Chain and SMEs, which commissioned the research was established to amplify the voice of smaller companies, crucial to the economy, to senior officials and will feed the stark warning to the Government as a matter of urgency.
Among the key findings:
- 25% of respondents did not employ any apprentices at all.
- 84% said that labour costs were the single biggest pressure on having to raise their prices followed by energy & utility costs and raw materials at 61%.
- More than 60% were pessimistic (in January 26) about the year ahead – even before the outbreak of war.
- 60% cited lack of technical qualifications as a challenge to recruitment.
The importance of SME’s is often hugely underestimated, making up more than 99% of all businesses in the UK and more than 95% of the manufacturing and engineering sector.
Survey respondents, (more than 250 companies), employ a total of 10,000 and generate £1.9bn to the UK economy.
“It is a mixed picture, but for many in the sector the situation was bad to begin with,” said Ann Watson, CEO of Enginuity, “but 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.
“Direct contact with many organisations in recent days makes us extremely concerned. 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 explains why, “In 2023 the minimum wage for an apprentice welder was £6/hour.
“Whilst that may seem low, apprentices attend college one day per week and we pay them for that time too.
“They’re in training for most of the time they are with us, working alongside a skilled fabricator, so we’ve always seen apprentices as an investment rather than an employee able to produce high volumes of work.
“In 2024 the apprentice NLW increased to £7.50/hour, and then in 2025 it increased to £10/hour. That’s a staggering 66% increase in 2 years. It makes offering apprenticeships exceptionally expensive.”