Few areas of economic policy depend more heavily on the engagement of private enterprise than skills.
Governments can set frameworks, allocate funding and reform institutions, but without sustained and meaningful involvement from employers, training systems struggle to deliver at scale. That has been a persistent lesson of UK skills policy over the past two decades, and one that remains unresolved.
The case for engaging private enterprise is straightforward. Employers are closest to shifting labour-market demand, understand how roles are changing, and ultimately control access to jobs, progression and in-work training. Where businesses invest consistently in skills, productivity tends to be higher, job matching improves and workers are better able to adapt as technologies and sectors evolve. Where they do not, shortages deepen, recruitment costs rise and opportunity narrows.
Yet the UK has long struggled to secure that level of engagement. Employer investment in training has declined in real terms since the early 2010s, even as skill requirements have increased. Department for Education data shows spending at its lowest level in over a decade, alongside a fall in the average number of training days per employee to the lowest level since records began. Apprenticeship participation remains limited, with a minority of employers ever taking on an apprentice, despite repeated reforms designed to widen uptake.
Beyond apprenticeships, engagement with lifelong learning is uneven. UK participation in adult education is low by international standards, particularly among those with lower qualifications or insecure employment. Employers frequently report that training budgets are among the first to be cut during periods of uncertainty, while workers in part-time or temporary roles are least likely to receive support. The result is a system that risks reinforcing existing divides rather than correcting them.
There are structural reasons for this pattern. The UK labour market is dominated by small and medium-sized enterprises, many of which lack the capacity to design and manage training provision. Short business cycles and tight margins discourage long-term investment, particularly where returns are uncertain or shared across the labour market. Skills systems themselves are often fragmented, requiring employers to navigate multiple providers, funding streams and regulatory requirements. For many firms, especially outside large urban centres, the transaction costs outweigh the perceived benefits.
There is also a question of confidence. Employers have experienced frequent reform and shifting institutional arrangements, from sector skills councils to local enterprise partnerships to mayoral combined authorities. While devolution has promised closer alignment with local labour markets, it has also introduced variation and complexity. For businesses operating across regions, the skills landscape can appear inconsistent and difficult to navigate.
These challenges are becoming harder to ignore. Labour shortages persist across construction, health, logistics and digital roles, while automation and AI are reshaping tasks within jobs as much as jobs themselves. The government’s commitment to large-scale AI training reflects an acknowledgement that workforce adaptation cannot be left to chance. But it also revives a familiar question: how far can public ambition go without deeper, more durable employer engagement?
In the search for responses, we posed a straightforward question on this most complex of subjects: “Is there a specific policy, innovation or shift in approach that you see best persuading more employers to engage meaningfully with skills reform?”
Imran Tahir, senior research economist, IFS
As the UK enters a new phase of skills reform, the challenge is no longer just about policy ambition or institutional design but whether employers see the system as relevant, workable and worth sustained engagement. With repeated reforms having struggled to shift behaviour at scale, what would genuinely change how employers interact with the skills system?
When employers decide whether to invest in training, they are making a judgement about whether it is worth the time, money and effort involved. As the UK enters another phase of skills reform, what matters is whether the skills system supports those decisions or makes them harder than they need to be.
Training is a costly investment, and the government already intervenes to lower those costs, most notably through the Apprenticeship Levy. Yet levy funding is tightly constrained. It can
only be used for apprenticeships, regardless of whether that is the most appropriate form of training for a given role or business.
For some employers, this simplifies decisions. For others, it means adapting training plans to fit the funding, rather than the other way round. Allowing public support to cover a wider range of high-quality training would better reflect how employers actually invest in skills.
But cost is only part of the picture. What employers get back from training is often uncertain. Some of this risk is inherent, such as the possibility that trained workers move on. Other sources of uncertainty are created by the system itself, particularly the lack of clear information about which forms
of training deliver value.
Employers are often confronted with hundreds of courses and providers, with little evidence to guide choice or compare returns. For many firms, especially those without in-house training expertise, these information gaps deter engagement even when public funding is available.
After decades of reform, the biggest difference would come from making the existing system easier to navigate and less uncertain. That starts with giving employers greater flexibility over how funding is used, alongside clearer, more usable information about which training delivers value.
Stephen Evans, chief executive, Learning and Work Institute
Skills are vital for productivity and also help employers make the most of new markets, innovation and capital investment. Yet Learning and Work Institute analysis shows the UK has a higher proportion of people with low skills than other countries and is on track to remain stuck in the middle of the pack internationally.
This is not helped by employers investing 36 per cent less in training for each employee than they were in 2005, graduates being three times more likely to get training at work than non-graduates, and the government spending £1bn less on skills in England than in 2010.
How to change this? First, we need a growing economy and stable policy. Easier said than done, but employers train their staff based on business need.
Second, we need more ways for employers to work together on training, given the risk that a rival might poach an employee I’ve spent time and money training. That will vary by sector; construction with lots of small employers already has its own levy scheme and minimum training requirements to work on site, for example.
Third, we need the public sector to lead the way, both in training its employees and requiring training and apprenticeships as part of public contracts. Lots of this already happens, but mayors across England can use their roles to advance this further.
Fourth, we need better incentives for employers. We’ve argued for a Skills Tax Credit that rewards employers investing in their staff, and our Get the Nation Learning campaign aims to showcase employers that do this and mobilise others to do the same.
Our future prosperity and business success is underpinned by skills. Time for us all to up our game.
Phil Smith, chair, Skills England
Skills training isn’t just for big business, it’s for everyone. And it has to work for smaller employers too.
Too often, the current system is overly complex and overwhelming for small and medium-sized enterprises (SMEs), especially those without HR teams or specialist support to navigate the bureaucracy. That isn’t acceptable. Small businesses employ around 60 per cent of the nation’s workforce – so we’re taking action.
Since joining Skills England last year, I’ve listened closely to small businesses who told me that apprenticeships didn’t always work for them. They raised concerns about long training periods, sometimes lasting several years-time away from the business, and the challenges of funding. Above all, they asked for more flexibility. We are evolving the growth and skills offer accordingly.
Soon, smaller businesses, and others, will be able to access new short courses. The first wave, known as apprenticeship units, will launch from April in critical areas such as digital, AI and engineering.
We have also introduced shorter-duration apprenticeships. Where appropriate, training can now be completed in eight months rather than the previous 12-month minimum.
A good example is the production assistant apprenticeship for the creative industries, where many workers are employed by SMEs and often trained through commissions lasting less than a year.
Local solutions matter too. Ensuring colleges and training providers offer courses that reflect the needs of local SMEs and help young people progress into permanent jobs with them depends on strong, place-based planning and collaboration.
New Local Skills Improvement Plans, supported by Skills England and due for publication this summer, will help drive this work.
This all matters because SMEs matter. They drive growth and are more likely to recruit younger apprentices. Skills England will continue listening and developing new, practical ways to help small businesses get the maximum benefit from a simpler, better system.
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