Making sense of the 2025 budget: What the new skills and apprenticeship measures mean for education and training providers
The Autumn Budget sets out some of the most significant skills reforms in recent years. Following the Budget, the government has announced an additional £820 million Youth Guarantee and a £725 million package of apprenticeship reforms, bringing the total investment to over £3 billion in skills and employment support for young people.
10 December 2025
Backed by £1.5 billion over the Spending Review period, the government is signalling a major shift in how training is funded and delivered. For colleges and private training providers, these changes will shape planning, partnerships and curriculum from April 2026, and they’ll need to adapt quickly.
The big picture: Skills at the heart of growth
Skills remain central to the government’s growth strategy. The Budget has committed £1.5 billion to employment and skills support, with £820 million dedicated to the Youth Guarantee. The focus is crystal clear: help young people get into work, build a pipeline for future talent and strengthen local economies.
Training providers who position themselves early with national priorities can secure partnerships, expand provision and help shape the next phase of national skills delivery.
Apprenticeships: Key changes you need to know
The Budget introduces a series of reforms designed to simplify funding and ensure that apprenticeships remain a strong choice for employers and learners.
For SMEs, the most significant change is the removal of 5% co-investment for apprentices under 25. These apprenticeships will now be fully funded, making it easier for small businesses to invest in early-career talent.
For levy payers, three major changes stand out:
- 10% top-up removed: Levy accounts will no longer receive the automatic government top-up.
- Levy experience reduced to 12 months instead of 2 years: Funds will expire in half the time, placing greater pressure on employers to plan and use their levy efficiently.
- Co-investment adjusts to 75/25: When employers run out of levy funds, the government will now cover 75% of remaining costs.
For providers, these changes mean reviewing employer pipelines, planning for shorter funding windows and preparing for modular delivery. Early conversations will be key.
This change is part of a larger £725 million package of apprenticeship reforms that will create 50,000 more apprenticeship and foundation apprenticeship opportunities for young people over the next three years.
The reforms aim to reverse the 40% decline in apprenticeship starts among young people since 2015/16.
New foundation apprenticeships in retail and hospitality will open up entry-level routes for young people, while a £140 million pilot with Mayors will connect young people, especially those not in education, employment, or training, with thousands of local apprenticeship opportunities. By partnering with regional leaders, the government is ensuring young people can access training that meets local employer needs.
From April 2026, new short courses in cutting-edge areas including AI, engineering and digital skills will begin rolling out, offering more flexible training options. A new Level 4 apprenticeship in AI will also be introduced to help employers develop their workforce in critical emerging skills.
The government also plans to streamline apprenticeship standards, reducing the current list of over 700. This could simplify delivery and give providers clearer pathways, making the system easier to navigate, but may require curriculum review and adaptation.
Youth Guarantee: Supporting almost one million young people
A central element of the budget is the introduction of the Youth Guarantee, which will support almost one million young people through an £820 million investment. This represents one of the most significant interventions to tackle youth unemployment in recent years, with the government responding to the 26% increase in young people not in education, employment or training (NEET) since pre-pandemic levels.
The guarantee creates a comprehensive pathway, with 350,000 new training and workplace opportunities across sectors including construction, health and social care, and hospitality. Every young person on Universal Credit and looking for work will receive a dedicated support session, followed by four weeks or intensive support. Work coaches will then refer them to one of six pathways: work, work experience, apprenticeship, wider training, learning, or a workplace training programme with a guaranteed interview.
For young people who have been searching for work for 18 months, the guarantee delivers a six-month paid placement at 25 hours per week, fully funded by government with wraparound support included. The scheme will roll out from Spring 2026 in six pilot regions: Birmingham & Solihull, East Midlands, Greater Manchester, Hertfordshire & Essex, Central & East Scotland, and Southwest and Southeast Wales.
Youth Hubs are also expanding to over 360 locations nationwide, ensuring young people can access CV advice, skills training, mental health support and careers guidance wherever they are.
For providers, this creates multiple partnership opportunities. They can work with employers to design six-week training programmes that include work experience and guaranteed job interviews, develop progression routes from placements into apprenticeships, and support delivery through expanded Youth Hubs in their region.
Wage changes: Budgeting for delivery
From April 2026, new wage rates will come into force:
- National Living Wage (21+): £12.71/hour
- 18–20-year-olds: £10.85/hour
- 16–17-year-olds and apprentices: £8.00/hour
These increases will help learners but may affect employer appetite and the types of roles that they offer, along with delivery costs.
For providers, the priority will be helping employers understand the return on investment, particularly for apprenticeships that build long-term capability.
Regional growth and local skills plans
The Budget also commits £13 billion for Mayoral Strategic Authorities between 2026 and 2030 to support local growth plans. Aligning provision with Local Skills Improvement Plans (LSIPs) will be key for providers looking to secure funding and partnerships.
Skills England: a key support partner
Skills England will play a central role in supporting providers and employers through these changes. Working alongside the Office for Investment, Skills England will help major investors navigate the skills system and establish a new infrastructure development service to help businesses get training for jobs off the ground quickly. For providers, this means a clearer pathway to supporting employers and accessing the resources needed to deliver training at pace.
What you need to do
These reforms will shape your curriculum, employer engagement and delivery planning from April 2026.
Start preparing now by focusing on these key actions:
- Map under-25 apprenticeship opportunities with SMEs and plan outreach.
- Build relationships with Mayoral Combined Authorities in your region to access the £140 million pilot connecting young people with apprenticeship opportunities, particularly if you work with NEET young people.
- Audit levy employer pipelines against the new 12-month expiry and adjust delivery schedules. They’ll need support to plan and launch programmes quickly.
- Prepare for standards rationalisation and explore modular options for short courses to strengthen flexibility.
- Partner on Youth Guarantee placement and design progression routes for learners into apprenticeships or further learning.
- Explore partnerships with local Youth Hubs expanding across all regions to support young people accessing your provision.
These steps will help you stay ahead of change and position your organisation as a trusted partner for employers and learners.
As the sector evolves, we’re here to help you navigate these reforms and make the most of new opportunities.
You can hear more in Kirstie Donnelly’s Budget podcast, and explore our previous blogs on funding and policy changes.
If you have questions about what the Budget means for your college or training centre, talk to us: customersupport@cityandguilds.com.