Significant reforms to the UK’s apprenticeship funding model are set to take effect from 2026, with the transition from the Apprenticeship Levy to the Growth & Skills Levy.
These changes will alter how employers fund training, reduce available financial support, and introduce tighter timeframes for using levy contributions.
For organisations, this creates both a cost challenge and a planning challenge, requiring a more strategic approach to workforce development and training spend, supported by effective procurement and cost management strategies.
What’s Changing?
The UK Government is reshaping the current Levy system to introduce greater flexibility in training, while also tightening funding controls.
Key reforms include:
- Restrictions on Level 7 (master’s level) apprenticeship funding
- A reduction in the time available to spend levy funds
- Removal of financial incentives, such as the 10% top-up
- Lower government co-investment rates
- Introduction of shorter, modular training options
Key Impacts for Employers
Restrictions on Level 7 Apprenticeships
From January 2026, Levy funding for Level 7 apprenticeships will be significantly limited.
Funding will generally only apply to:
- Individuals under 22
- Individuals under 25 with an Education, Health and Care (EHC) plan
For many organisations, this removes a key route for funding senior leadership and specialist training programmes.
Commercial impact:
Employers may now need to self-fund high-level training, increasing overall L&D costs.
Faster Expiry of Levy Funds
The time limit for using levy contributions will be reduced from 24 months to 12 months.
What this means:
- Less flexibility in workforce planning
- Increased risk of unspent funds expiring
- Greater urgency to allocate training budgets effectively
Commercial impact:
Unspent Levy funds effectively become a lost investment, placing pressure on organisations to act quickly and strategically, particularly when managing indirect spend and supplier costs
Removal of the 10% Government Top-Up
From August 2026, the Government will remove the 10% monthly top-up on Levy contributions.
What This Means:
- Immediate reduction in available training budget
- Lower return on levy contributions
- Increased requirement for internal funding
Reduced Government Co-Investment
Government co-investment for employer-funded training will decrease from 95% to 75%.
Commercial impact:
Employers will need to contribute a higher proportion of training costs, increasing the overall cost of workforce development programmes.
Introduction of the Growth & Skills Levy
- Shorter, modular “apprenticeship units.”
- Foundation apprenticeships
Opportunity:
Employers can align training more closely with specific business needs, rather than committing to full apprenticeship programmes.Rising Employment Costs
Increases to the apprentice minimum wage will further raise the cost of hiring and training apprentices.
Commercial impact:
Combined with reduced funding support, this will increase the total cost of apprenticeship programmes.
What This Means for Your Organisation
These changes represent a shift from a funding-rich model to a more constrained and commercially driven system.
Organisations will need to:
- Reassess how Levy funds are used
- Prioritise training that delivers measurable business value
- Plan more proactively to avoid losing funds
- Consider alternative funding routes for senior-level development
Without a structured approach, there is a real risk of:
- Wasted levy contributions
- Increased training costs
- Misalignment between training and business needs
What Should Employers Do Now?
Review Your Levy Strategy
Assess how your organisation currently uses levy funds and identify gaps or inefficiencies through a structured spend and supplier review.
Accelerate Training Plans
With a shorter expiry window, forward planning is critical to ensure funds are fully utilised.
Reassess High-Level Training
Evaluate whether Level 7 programmes remain viable or require alternative funding approaches.
Prioritise ROI
Focus on training that delivers clear commercial or operational benefits.
Explore Flexible Learning Options
Consider how modular training can support more targeted skill development.
How SRSCC Supports Organisations
At SRSCC, we support organisations in maximising value from their operational and indirect spend, including training and workforce development.
Conclusion
The transition to the Growth & Skills Levy marks a significant shift in how organisations fund and manage training.
With reduced funding, tighter timeframes, and increased costs, employers must take a more proactive and commercially focused approach to workforce development, particularly when managing supplier costs and procurement performance.
Organisations that act early, by reviewing their strategy, optimising spend, and aligning training with business objectives, will be best positioned to maximise value under the new system.
If your organisation needs support in reviewing training spend or adapting to these changes, SRSCC can support with training and support.
