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24 September 2026

The chancellor must raise apprenticeship funding bands

Employers can't fill the roles reindustrialisation needs while the apprenticeship routes into them keep shrinking, writes Robert Halfon
Robert Halfon Guest Contributor

Executive director, Make UK, and former minister for skills

4 min read
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Ministers have set out what they want from manufacturing: more investment, more innovation, higher growth and a bigger industrial base across the country.

Manufacturers want the same. Our members can tell you which machines they would buy and which lines they would open.

The harder question is asked less often. Who is going to do the work?

Advanced facilities need engineers. New lines need technicians, welders, machinists, fabricators, controls programmers and maintenance staff. Reindustrialisation cannot be legislated into existence. It is delivered by trained people, and we are still not training enough of them.

Manufacturing produces £220 billion of output, supports 2.6 million jobs and accounts for 42 per cent of UK exports. Its average salary of £41,200 is 8 per cent above the national average. These are precisely the skilled regional jobs ministers want.

But the route into them is narrowing. Apprenticeships in engineering and manufacturing have fallen by around 40 per cent since the levy arrived in 2017. Engineering starts fell 25 per cent between 2017 and 2024, with level 2 – the entry point for school leavers – down by more than half.

There are currently roughly 48,000 live vacancies in manufacturing, while close to three-quarters of manufacturers say technical skills shortages are their biggest recruitment barrier.

Meanwhile, in the first three months of 2026, more than one million young people aged 16 to 24 were not in education, employment or training – 89,000 more than a year earlier. A record number of young people are outside work and study while employers cannot fill skilled vacancies. Those are not two separate problems. They are one problem, handled by two different parts of Whitehall.

An apprenticeship is the most direct connection between them. It pays from day one, carries no debt and ends in work the wider economy demonstrably needs. Visit almost any factory and you will meet plant directors, engineering managers and chief executives who started on the shop floor at 16 or 18. That is a ladder of opportunity, and it worked without anyone writing a strategy about it.

So what should the chancellor do in the autumn budget?

Start with funding bands, because they are doing the most damage. Many have never been uprated, while equipment, energy and instructor salaries have risen sharply. Where a band no longer covers training costs, the employer pays the difference – often several thousand pounds per apprentice – or the provider withdraws the standard altogether.

Make UK is asking the chancellor to raise the maximum band from £27,000 to £35,000 and prioritise advanced manufacturing occupations in the funding review. With 86 per cent of manufacturers expecting employment costs to rise again this year, asking employers to absorb a widening shortfall will produce fewer apprentices, not more.

Second, spend the money already collected. More than £1 billion raised from business for skills is not returned for training. Make UK estimates that ringfencing the growth and skills levy and immigration skills charge could fund around 234,000 additional starts. Employers find it hard to accept that a levy introduced to fund training depends on how much the Treasury snaffles away for other “priorities”.

Third, explore skills tax relief for employers who invest in training. Manufacturers receive tax support to invest in physical capital, but investment in people is not supported to the same degree. The Treasury should review existing relief on work-related training and consider how it could encourage investment in critical roles and skills.

Any relief must be laser-focused on technical training for critical roles.

None of this will hold together unless skills and industrial policy are written in the same room. An industrial strategy that names advanced manufacturing as a growth sector, alongside a funding system that makes its apprenticeships uneconomic to deliver, is not a strategy. It is two documents pointing in opposite directions.

There is a wider argument that outlasts any budget. For decades, we have described the technical route as the thing you do if university is not for you. Most young people do not go to university. They are not a residual category, and their route should not be treated as one.

The test for this Budget is not whether ministers restate their commitment to reindustrialisation. It is whether the system allows an employer in Harlow, Halifax or Hartlepool to take on an apprentice next September.

Build the rungs and the ladder of opportunity does the rest. Leave them out, and the ambition stays on paper while another cohort of young people is told to wait.

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