England’s apprenticeship budget will grow to £3.3 billion in 2026-27, FE Week has learned.
The figure represents a 5.8 per cent rise on the current £3.118 billion allocation, a sum already boosted mid-year by £43 million to meet higher-than-expected demand.
The latest settlement adds a further £180 million, but comes amid ongoing financial strain and controversial funding reforms.
It follows the first-ever overspend of the apprenticeship budget in 2024-25, which forced the government to inject £345 million and pushed total spending beyond £3 billion in 2025-26.
Despite the uplift, ministers are under pressure to rein in costs. Apprenticeship starts have remained largely flat over the past four years, while spending has surged due to the growth of higher-level apprenticeships – predominantly taken by older learners – which are more expensive to deliver.
Meanwhile, participation among young people has fallen sharply. Starts for under-25s dropped by 40 per cent over the past decade, while almost one million young people are now not in education, employment or training – an increase of 248,000 between 2021 and 2024.
In response, ministers are attempting to redirect funding towards younger learners while implementing savings measures.
Popular management apprenticeships are among 16 standards that will be defunded later this year, with caps introduced to prevent a repeat of the recruitment surge seen before level 7 funding was withdrawn for over-21s in January.
It is estimated the move, announced on Monday, could save up to £300 million annually, while savings from level 7 apprenticeships should reach around £200 million.
The changes form part of a wider reform of the apprenticeship levy into a broader “growth and skills levy”. This will expand the scope of funded provision, including the rollout of short courses – dubbed “apprenticeship units” – and new foundation apprenticeships in sectors such as hospitality and retail from April.
New incentives of £2,000 for small and medium-sized businesses hiring 16 to 24-year-old apprentices will also come into force from October, which can be stacked on top of existing incentives of £2,000 for hiring a foundation apprentice.
Treasury top-slice continues
While the apprenticeship budget is increasing, the issue of a Treasury top-slice persists.
Employer levy contributions are forecast to generate £4.5 billion in 2026-27. Of this, around £500 million will be allocated to the devolved nations. Combined with the £3.3 billion apprenticeship budget, this leaves an estimated £700 million not returned to the system.
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