Enginuity, an independent, self-funded charity dedicated to closing skills gaps in UK engineering and manufacturing, has called on the Government to take urgent steps in the upcoming Budget to restore the affordability of apprenticeships, warning that failure to act could damage growth for years to come.
Apprenticeship starts have fallen sharply, with 170,000 fewer places available in 2024 compared to 2014. Enginuity’s latest SME Snapshot shows employment costs are now the greatest pressure on businesses, driven by rising apprenticeship wages and recent increases in National Insurance contributions.
CEO Ann Watson said: “High employment costs are now the largest factor driving inflationary pressures and undermining the UK’s labour market. This week’s unemployment figures may well reflect just that. The skills system must work for the majority — especially SMEs — who are fighting to survive. When it becomes too expensive to invest in the skills of the future, we jeopardise not only businesses but also the prosperity and innovation of our country.”
She added: “This is a direct result of soaring employment costs, including a 66% increase in the National Living Wage for apprentices over just two years, alongside additional increases to National Insurance for the existing workforce. It is absolutely right for apprentices to be paid fairly but for the first 18-24 months of the apprenticeship they are effectively in training and the cost differential between an apprentice and some experienced workers is now so small that we may see many employers replacing their normal apprentice intake for those with more experience. For small and medium-size enterprises (SMEs), the backbone of UK manufacturing, these costs have become unsustainable, forcing many to cancel or downsize their apprenticeship programmes.”
Chris Houston, managing director of
Tadweld, a leading steel fabrication and engineering company, explained the impact: “In 2023 the minimum wage for an apprentice welder was £6 an 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 NLW increased to £7.50 an hour, and then in 2025 it increased to £10 hour. That is a staggering 66% increase in two years. It makes offering apprenticeships exceptionally expensive.”
Tadweld’s campaign to safeguard apprenticeship opportunities highlights the growing challenge for SMEs. While apprenticeships have long been a cornerstone of UK industry, recent policy decisions and wage increases have made them increasingly unaffordable.
Enginuity warns that the cost of employing an apprentice has risen by over 70% when factoring in wages and training, leaving many businesses with no choice but to suspend programmes that have produced skilled professionals for decades. With demand for roles such as welders set to rise sharply in the next five years, but only 231 welding apprentices trained in 2024, a situation the organisation describes as ‘unsustainable’.
Enginuity is calling on policymakers to review employment costs and ensure SMEs can continue to invest in talent and training. Ann Watson concluded: “Only by prioritising apprenticeships can we secure the future of British industry and provide meaningful opportunities for young people.”