Funding reforms are reshaping the apprenticeships and skills system, with significant changes already underway and further developments planned. Understanding what is changing, why it matters, and how to respond is essential for employers, providers and stakeholders navigating an evolving policy environment.
This article summarises key points from the session where guest speakers, listed below, joined Gareth John to discuss the latest funding changes in apprenticeships and skills. Speakers discussed:
- The current funding landscape for apprenticeships and skills, including recent announcements and confirmed changes
- What is planned next, the direction of travel for government policy, and how reforms such as the Growth and Skills Levy may evolve
- The practical implications for employers and training providers, including risks, opportunities and how to respond strategically to ongoing change
Speakers and panelists
- Gareth John, Policy Director at First Intuition
- Chloë Mattick, Policy and Communications Manager at First Intuition
- Paul Russell, Skills for Employment at Department for Education
- Alex Collins, Senior Business Development Manager at ICAEW
- Rob Alder, Head of Apprenticeship Relationships at ACCA
- Sophie Lee, Education Policy Manager at AAT
- Charlotte Shaw, Head of Client and Sector Engagement at First Intuition
- David Malthouse, Commercial Director at First Intuition
You can watch the recording of the session below.
Level 7 apprenticeship funding: age caps and exemptions
From January 2026, age restrictions on Level 7 apprenticeship funding came into place, which now limit funding to learners aged 21 and under. However, important exemptions apply, including continued eligibility for care leavers up to age 24 and learners with Education, Health and Care Plans.
- Funding is now limited to learners aged 21 and under
- Key exemptions apply for:
- Care leavers, who remain eligible up to age 24
- Care leavers are entitled to a £3,000 tax-free bursary
- Learners with Education, Health and Care Plans
- The Level 7 age exemption potentially opens access for around 30,000 learners aged 22–24
- Many eligible learners are currently not claiming this support
While the change was widely seen as disappointing, it was recognised as a more proportionate outcome than the originally proposed full defunding of Level 7. Speakers stressed that care leavers represent an important and often overlooked talent pool and that employers should factor this exemption into recruitment and workforce planning.
Levy and budget changes affecting employers
Several significant funding changes affecting levy payers were confirmed.
- Removal of the 10% government top-up on levy contributions
- Reduction of levy fund expiry from 24 months to 12 months
- Increase in employer co-funding from 5% to 25% once levy funds are exhausted
Collectively, these changes increase cost pressures and place greater importance on active levy management, forecasting and strategic planning. The increase in employer co-funding was highlighted as particularly challenging for SMEs that pay the levy.
- Moving from 5% to 25% co-funding represents a fivefold increase in cost
- Career changers and returners to work are most affected, as they are more likely to be over 25
- Levy-sharing arrangements were identified as an increasingly important option for SMEs
Employers were encouraged to explore levy share opportunities early, as demand is expected to increase.
Employer behaviour and early responses
Employers reported a range of responses to the new funding environment, reflecting different organisational situations and workforce needs.
- Increased focus on recruiting younger learners earlier
- Growing interest in Level 4 apprenticeships as an alternative or stepping stone
- Use of blended models, combining funded and commercially funded provision
- Some consideration of commercial-only training routes or, in limited cases, offshoring
Despite this, many employers confirmed that their training numbers are broadly being maintained, even where delivery models are changing.
Devolution and Local Skills Improvement Plans (LSIPs)
The session emphasised the importance of employer engagement in Local Skills Improvement Plans, which are currently being refreshed nationally.
- LSIPs are entering a new three-year cycle
- Local priorities are being shaped now, primarily via Chambers of Commerce
- There is a risk that accountancy and professional services are overlooked because they support all sectors
Employers were strongly encouraged to engage at this stage to ensure their skills needs are reflected in future local funding decisions. You can find your Local LSIP here: Local skills improvement plans and designated employer representative bodies – GOV.UK
Assessment reform and End Point Assessment changes
Major changes to apprenticeship assessment are expected across all standards.
- Reduced duplication and over-assessment
- Greater recognition of on-programme assessment
- Shorter, simplified assessment plans
- Employers will take greater responsibility for assessing behaviours
Accounting standards at Levels 2, 3, 4 and 7 are expected to be among the first to transition. Changes will apply to new starts only, with existing learners remaining on current assessment plans.
Ofsted inspection framework changes
Providers are also preparing for changes to the Ofsted inspection model.
- Move from a single overall grade to a report-card approach
- Five grading levels, from Exceptional to Urgent Improvement
- “Expected” represents a high standard, not an average outcome
- A “secure-fit” model means the lowest judgement area determines the overall outcome
Employers were advised that inspection language and outcomes will look different going forward and should be interpreted accordingly.
Levy-funded short courses and skills gaps
Levy-funded short courses are expected to launch from April, initially in limited areas.
- Initial focus on AI, digital and engineering
- Early provision likely to be narrow and highly targeted
- Strong employer demand for skills in:
- AI and automation
- Cybersecurity
- Critical thinking and higher-order skills
Ongoing engagement with Skills England and government will be important in shaping how this offer expands over time.
Collaboration and sector-wide working
Awarding bodies stressed that continued collaboration will be essential to sustaining apprenticeship uptake and skills development:
- Strong alignment between employers, providers and awarding bodies
- Shared concern about unintended consequences of funding restrictions
- Collective focus on protecting progression routes and long-term talent pipelines
Key messages and next steps for employers:
- Review recruitment and progression strategies in light of Level 7 changes
- Ensure awareness of care leaver funding and bursaries
- Actively forecast levy spend and co-funding exposure
- Engage with LSIP consultations now
- Contribute to employer surveys to inform future policy engagement
Useful resources and slides
Edge Foundation is leading a campaign on encouraging more SMEs to offer apprenticeships
Local skills improvement plans and designated employer representative bodies – GOV.UK