The UK government is developing proposals to restructure apprenticeship funding in England by making it more expensive for employers to train workers above age 25 compared to younger apprentices. The policy aims to address a significant decline in youth apprenticeship starts over the past decade and tackle rising youth unemployment, which has pushed the number of young people not in education, employment, or training to nearly 1 million.
Under the proposed changes to the growth and skills levy—a £4 billion annual tax on large employers—a new “co-investment” rule would limit employer access to training funds based on worker age. Currently, the levy allows large employers to draw freely from dedicated accounts funded by a 0.5% tax on annual pay bills. The new structure would make funds available to cover full training costs for apprentices aged 16 to 24, but would cover only 75% of costs for older apprentices, requiring employers to finance the remaining quarter. The measure is under consideration for a phased implementation beginning in September 2027.
This approach represents a departure from previous government messaging that employers could freely determine how to spend their allocated levy funds. The shift reflects mounting pressure to address youth employment concerns and represents a rebalancing effort, as over half of current apprenticeship starts now involve workers over 25, while under-19 enrollment has declined by nearly 50% in a decade. Officials acknowledge the change will be unpopular with employers but see it as necessary to restore the apprenticeship system’s focus on younger workers.
The proposal emerges as part of the government’s broader response to economist Alan Milburn’s review into youth employment, with findings expected in the autumn. The Chancellor is expected to announce related youth unemployment measures in a forthcoming budget statement. Government officials stated they remain committed to creating 50,000 additional apprenticeships for young people and introducing a £2,000 hiring payment for small and medium enterprises that employ apprentices aged 16 to 24.
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