UK apprenticeship funding cut to impact employers and education providers

Rami Labib and Andrew Church, education experts at Pinsent Masons, were commenting after the government confirmed the change, which will take effect from January 2026. The decision, announced by the Department for Education, means that from next year, employers will only be able to use the apprenticeship levy to fund master’s-level apprenticeships for those aged 21 and under. Employers will be required to pay in full for older employees, which will likely lead to fewer enrolments on level 7 degree apprenticeships at universities.

The change is part of a broader reform package aimed at “rebalancing” the apprenticeship budget towards lower-level training in an attempt to get more younger apprentices studying. Level 7 apprenticeships are equivalent to a master’s degree, representing the highest level of apprenticeship currently available. Typically operating across two to five years, depending on the programme and sector, these apprenticeships combine full-time paid work with part-time academic study, often delivered by a university or professional training provider. Level 7 apprenticeships are designed for experienced professionals looking to upskill, graduates entering high-level roles, and employers seeking to develop leadership and specialist skills in their workforce.

The funding cut is expected to have a significant impact on sectors that rely heavily on level 7 apprenticeships, such as the NHS, education, and local government.

The change may mean that some employers will no longer offer level 7 apprenticeships to their employees due to the financial cost. Church said: “Although the changes are welcome news for young people entering the workplace, the plans may damage certain sectors and make it difficult for young people who didn’t go to university to enter certain professional roles. The change is also likely to impact universities, many of which have seen a boom in level 7 degree apprenticeships in recent years”.

The government previously outlined plans in the Autumn 2024 Budget to replace the current apprenticeship levy with a new ‘growth and skills’ levy, designed to operate more flexibly. Labib called for the new design to be “less bureaucratic than the current system to ensure maximum engagement and uptake by employers.”

“By streamlining processes and reducing administrative burdens the hope is the new levy can better support employers in developing the skills needed for the economy,” said Labib. “Getting the new levy model right will be crucial in order to drive investment by employers in training opportunities” he added.