Earlier this week, the Secretary of State for Work and Pensions, Pat McFadden, announced a series of reforms to the apprenticeship system, signalling a significant shift toward prioritising younger learners and entry-level pathways.
£1 billion Youth Employment Package
As part of a broader youth employment initiative, the government has announced a £1 billion package aimed at creating 200,000 jobs and apprenticeship opportunities. Key measures include:
- A £3,000 Youth Jobs Grant for businesses hiring 18–24-year-olds on Universal Credit after six months of job searching.
- A £2,000 incentive for SMEs taking on apprentices aged 16–24.
- Expansion of the Jobs Guarantee scheme, raising the upper age limit from 21 to 24, potentially making 35,000 additional young people eligible for fully subsidised six-month jobs.
The reforms form part of what the government has described as a £2.5 billion investment over three years, aiming to support almost one million young people and create up to 500,000 opportunities to work or train.
Analysis:
These subsidies have the potential to reduce hiring risks and encourage firms, particularly SMEs facing rail skills shortages, to take on young people with limited experience. Several important considerations, however, could influence their effectiveness.
At present, it is unclear when the grants will become available, and any uncertainty could delay apprenticeship starts or create instability for employers and apprentices. To avoid this, full details of the grants must be provided without delay.
More broadly, these subsidies will not be a silver bullet. This is not the first time such measures have been tried, and past schemes offering similar subsidies have seen mixed take-up, with potential risks including deadweight effects, where employers claim grants for jobs they would have created anyway, and short-term placements. Economists tend to view hiring subsidies as useful but not transformative, so their impact will also depend on whether broader measures are successfully implemented.
This is particularly evident in the need to strengthen pathways into Level 2 roles. NSAR analysis has shown that many economically inactive people currently face significant barriers that prevent them from accessing apprenticeships or entry-level opportunities. Without targeted support, guidance, and preparatory training, these young people may be unable to take advantage of the new jobs and apprenticeship schemes, limiting the overall impact of the subsidies. Greater clarity and action from the government on this issue will be essential.
Apprenticeship Funding Reforms
To fund the measures outlined above, the government is redirecting funding from other apprenticeships, with eligibility changes affecting multiple standards.
Defunding Existing Apprenticeship Standards
Sixteen apprenticeship standards are set to lose government funding, with changes expected to take effect from 1 September 2026. Notable standards being defunded pertinent to the rail sector include the Level 3 Team Leader and Operations Manager.
Analysis:
While reducing NEET figures is an important goal, streamlining the apprenticeship system in this way carries risks. The removal of these high-demand standards could unintentionally alienate the employers essential to the system, undermining both their confidence and the overall apprenticeship brand.
There is a concern that current policy prioritises headline statistics over genuine employer demand. Apprenticeships deliver their greatest value when they provide businesses with the precise skills they need through credible, attractive pathways. Where this alignment breaks down, participation declines.
Apprenticeships must meet real workforce requirements, not serve solely as a social policy instrument. Social mobility and employer utility are not inherently in conflict, and apprenticeships have significant potential to tackle economic inactivity, particularly in sectors such as rail. However, without employer buy-in, both the volume and quality of placements could fall, limiting opportunities for young people and leaving critical skills gaps unaddressed. Meaningful apprenticeships depend on practical investment and active participation from industry. Without this, neither young people nor employers will be well served.
It is concerning, therefore, that today’s announcement seems to move the system away from the employer-led model that is essential for its success.
Introduction of New Apprenticeship Units
The government has also announced the first seven new apprenticeship units that will be funded through the Growth and Skills Levy. These are:
- AI leadership and strategy development
- Electric vehicle charging point installation and maintenance.
- Electrical fitting and assembly
- Mechanical fitting and assembly
- Permanent modular building assembly
- Solar photovoltaic installation and maintenance
- Welding
The new units for electrical fitting, mechanical assembly, and welding align with core rail requirements, so there is clearly potential here and probably more than we anticipated from these new units. However, it remains unclear how applicable these modules will be. A further dedicated update on apprenticeship units will be issued in the coming weeks.
In other policy news
NISTA Pipeline Update
Last week, NISTA published an update to its Infrastructure Pipeline, which now includes data on workforce demand across various sectors. NSAR provided the rail-specific data for this update. While this is a positive step, it is essential that this information is now expanded to the project level. Such granularity is required to provide the transparency needed for informed decision-making and effective workforce planning across individual schemes.
If you would like to discuss any aspect of this briefing further, please contact Edward Hughes, Head of Policy and Engagement: edward.hughes@nsar.co.uk