Small firms are getting a material cost cut: the Government will remove the 5% co‑investment that SMEs pay towards training for eligible apprentices under 25. The change sits alongside a £725 million package to expand apprenticeship delivery, and a wider £1.5 billion commitment through the Youth Guarantee and the Growth and Skills Levy that aims to create 50,000 additional apprenticeship and foundation places over the next three years.

For SMEs the mechanics are straightforward. The state will cover 100% of approved training and assessment costs within the funding band for under‑25 apprentices at small and medium‑sized employers. Wages, employer on‑costs and mentoring still sit with the business, but the upfront training contribution-often hundreds of pounds and, on technical standards, sometimes over a thousand-falls away.

Expect the first effects to show up in entry‑level hiring. Hospitality, retail and logistics rely more heavily on young starters and should feel the policy fastest, especially as new foundation apprenticeships are opened in those sectors. The intent is to turn churn into progression by giving early roles a structured training pathway rather than informal learn‑as‑you‑go.

Geography matters. A £140 million pilot will give mayors in England the means to connect local employers with young people, with a focus on those not in education, employment or training. That local brokerage should cut search time for both firms and candidates, though delivery will vary by combined authority depending on sector priorities and provider capacity.

The package adds longer‑term flexibility for upskilling existing staff. From April 2026, short, modular courses in areas such as AI, engineering and digital are due to roll out, alongside a new Level 4 apprenticeship in AI. Defence employers are already working with officials on work‑based formats designed to blend learning with production schedules.

Ministers link the reforms to a broader goal set by Prime Minister Keir Starmer: two‑thirds of young people in higher‑level learning through academic, technical or apprenticeship routes. Government figures show youth apprenticeship starts have fallen by almost 40% since 2015/16, which helps explain the renewed focus on entry routes and the re‑shaped Growth and Skills Levy. The political message is that apprenticeships should stand on equal footing with university pathways.

Put this into an SME budget. A 12‑person engineering supplier weighing a Level 3 apprentice in 2026 no longer needs to reserve a training co‑payment. That eases cashflow in the first year and, when matched with a mayoral‑run candidate pool, can reduce time‑to‑hire. In a mid‑size pub group, a foundation apprenticeship can formalise the first six months of employment, stabilising rotas and improving early retention.

Business groups are broadly onside. The Federation of Small Businesses sees fewer barriers for firms without HR teams. Industry bodies such as Make UK and the Institute of Directors argue that scrapping the 5% contribution should nudge more SMEs to take first‑time apprentices, while construction, logistics and automotive leaders frame the change as vital for hard‑to‑fill roles.

Delivery risks should not be ignored. Provider capacity needs to keep pace with demand or waiting lists will grow. The fee removal does not touch wage bills, employer National Insurance or the supervisory time that good apprenticeships require. And the more flexible, modular options do not arrive until April 2026, so firms will need to plan the next 12 to 18 months using the existing system.

This announcement also sits alongside earlier Youth Guarantee measures, including £820 million aimed at boosting skills and job support for young people. Ministers say that package will create around 300,000 opportunities to earn and learn and provide guaranteed jobs for almost 55,000 young people, complementing the apprenticeship reforms rather than competing with them.

On implementation, Skills England will work with the Department for Work and Pensions and the Office for Investment to help major employers work through the system and stand up training quickly. Officials say they will keep talking to business in the coming months to fine‑tune flexibilities that further boost young starts while remaining workable for employers.

Our read for owners and finance directors is pragmatic. Map the roles that genuinely suit an under‑25 apprenticeship, speak early to local providers about spring and autumn intakes, and ask your combined authority how the pilot will operate in your area. The signal is clear: if you open a door for young talent, the Government will pick up more of the training bill.