UK skills crisis to worsen as small businesses unable to take on apprentices, think tank warns

A new report warns government to fix the issues preventing small businesses from fully embracing apprenticeships, particularly in skilled trades.

Government data show that for every apprentice vacancy, nearly two young people are interested, potentially leaving many without placements. A report from a cross-party thinktank, the Social Market Foundation (SMF), Laying the foundations, published on 4 December,¹ looks at the challenges holding small and medium skilled trade firms back from offering more apprenticeships to younger people.

Speaking with small trades firms,² the authors say they learned that a lack of engagement is one of the biggest issues preventing them from taking on an apprentice. They often lack necessary relationships. The majority of businesses surveyed said that they have little to no interaction with local colleges (52%), schools (69%), independent providers (60%), or universities (90%). This makes it hard, often impossible, to navigate the complex process of recruiting and training apprentices.

It is crucial to improve the apprenticeship-employer ecosystem the SMF said. In particular, small business skilled trades need a ‘go-to’ intermediary service, whose role would be to strengthen local connections, bringing SMEs and training providers to work together more effectively. The SMF noted that its proposed system would “complement, not complicate” employment reforms that will revamp Jobcentres to improve access to work for young people – including apprenticeships (see notes).

There are further challenges when it comes to green skills. Green skilled trade firms have the specific issue of shortage of relevant courses in the emerging sectors. For example, a senior human resource manager bemoaned the failure of colleges and training providers to catch up with increasing demand for these roles. SMF observed that green skilled tradespeople see the ‘green education pipeline’ in the UK lagging behind the likes of Denmark and Germany.

To this end, the SMF recommends that Skills England – the new body positioned to lead the UK’s skills landscape – oversees the proposed intermediary system. Skills England should identify priority sectors and, from this, guide the strategic focus and targeting for intermediary organisations. The body is perfectly placed to do so, having already flagged the green workforce and housebuilding as skills priorities in its first report, the SMF notes.

Despite the challenges, it is worth noting that enthusiasm for apprenticeships remains high among small businesses, who recognise the vital role young people can play in addressing skills shortages. With a growing focus on green skills and the challenges posed by an aging skilled workforce, apprenticeships are seen as key to creating a sustainable talent pipeline for the future.

The full list of recommendations include:

1. Increase the apprenticeship incentive payment for under 19s to £3,000. This should be funded using apprenticeship levy underspend, rather than having it returned to the Treasury.
2. DfE and Skills England should launch a national campaign to promote awareness and positive perceptions of young apprentices. This campaign should be led by the Department for Education and Skills England.
3. Establish an intermediary system that strengthens the relationships between SME trades firms and training providers, forming a cohesive apprenticeship network that offers guidance and support for employers, including administrative and pastoral services. To action this we recommend the following steps.

• • The Department for Education increase the coverage of brokerage pathfinders to provide wider support.
  • Skills England takes responsibility and oversight of the new intermediary system and set the strategic direction.
  • Local authorities (initially) manage the delivery of the intermediary system, before transitioning this responsibility to Careers Hubs.

Niamh O Regan, Researcher at Social Market Foundation, said: “By and large, small businesses are keen to do their part to train the next generation. Unfortunately, for many, taking on an apprentice is good in theory and painful in practice. The process can be complex and the administrative burden high – ultimately blocking the pipeline of talent needed to overcome the UK’s skills crisis.

Fostering better connections between SMEs and training providers can pave the way for a more skilled workforce, ready to tackle the challenges of tomorrow.”

Jake Shepherd, Senior Researcher at Social Market Foundation, said: “To boost the number of apprenticeships and strengthen the workforce in key skilled trades – critical for meeting the UK’s infrastructure and climate goals – small businesses must be helped to overcome the barriers they face.

The government can act by creating an intermediary system that brings together Skills England, Careers Hubs, and training providers to guide businesses and make the apprenticeship process easier to navigate. At the same time, a national campaign can highlight the benefits of hiring young apprentices, while increased financial incentives would help small businesses manage the costs of taking them on.”

Donna Murrell, Managing Director, Reed in Partnership said: “Reed in Partnership works with many small businesses who tell us that they find it difficult to recruit and support apprentices, especially young people who have just left school and may need some support with their life skills. We must address this, to get the skilled tradespeople we need for sustainable economic growth and open up fulfilling careers to young people. We think that implementing the practical proposals in this report will enable local businesses, training providers and other local stakeholders to do so.”

Simon Ayers, Chief Executive, TrustMark, said: “At TrustMark, we know there is an urgent requirement for skilled, trained and competent tradespeople across the home improvement sector if we are to make Britain’s homes warmer and healthier. Having started as an apprentice in the gas industry, I recognise the vital role apprenticeships can play in addressing skills shortages and how they are key to creating a sustainable pipeline for the future of the industry. We believe that the solutions proposed in this report to help small businesses take on and support apprentices are both practical and deliverable and we hope the skilled trades will now embrace these opportunities to educate and foster the growth of the next generation. We look forward to working with Skills England and the Department for Education in shaping the right support for our small businesses to play their part in the net zero transition.”

Notes
[1] The report is sponsored by Reed in Partnership, with support in kind from TrustMark. The SMF retains full editorial independence.
[2] Research methods: In August 2024, we partnered with the field agency Indiefield to conduct 10 interviews with individuals from a range of small and medium-sized enterprises, including sole traders and family-owned businesses. In addition, the SMF recruited one participant independently. Of the 11 businesses interviewed, five had employed an apprentice within the past three years, while the remaining six had not. We also conducted an interview with green policy experts from the FSB, bringing the total number of interviews to 12.