Government is paying firms to hire apprentices – so why aren't they?

160 young people – is this really a skills revolution?

Just 160 young people started the Government's new foundation apprenticeships during the first three quarters of the 2025/26 academic year. That's an extraordinarily small beginning for a scheme intended to become an important route into work for young people, particularly when Britain has a serious youth employment problem. Government is now putting more money behind apprenticeships, including fully funded training and thousands of pounds in potential employer incentives, so perhaps the question isn't whether small businesses could help make the scheme work, but what is still stopping them?

THE “SKILLS REVOLUTION” IS STALLING

Only 160 young people (16-24) have been enrolled into the Government’s flagship foundation apprenticeship scheme in its first eight months. That’s far short of its ambition of 30,000 starts by the end of the parliament. The Fabian Society is warning that unless employers, especially small and micro businesses, engage with the system, the UK risks another lost generation of young people locked out of work.

A foundation apprenticeship is a paid entry‑level job for a young person (aged 16-24) that combines real work with structured training for at least eight months, designed to give them a clear first step into skilled employment. Small and micro businesses are uniquely placed to make this scheme work, and to benefit from it, if they feel it’s affordable and they have the capacity to take on an inexperienced young person.

Going Wrong

Official figures show there’s only been 160 foundation apprenticeship starts so far. They are aimed at the under‑25s and apprenticeship starts are still 40 percent below a decade ago. More than half of all apprenticeships are taken by over‑25s. Employers often aren’t aware of T‑levels and V‑levels and the route into apprenticeships is confusing and fragmented and despite government incentives for many the scheme is still unaffordable.

Experts warn Britain risks a “lost generation” as unemployment rises among young people and mental ill health grows. Ministers are waiting for the Government’s review and the former Minister who is leading it, Alan Milburn, is expected to recommend sweeping changes to education, welfare and employment policy. Even if these recommendations are acted on it will take years to turn the tanker around.

In the meantime, small businesses don’t need to wait for recommendation and can lead the way now, if it works for them.

Vital

Small businesses are the backbone of local economies which means that they are the businesses that provide first jobs, real‑world experience, and hands‑on learning in local communities.

Foundation apprenticeships were designed with small employers in mind with paid roles, eight‑month minimum placements, and attached training. If small businesses step in, the scheme can scale quickly.

Start with one young person

You don’t need a big HR department. You need one role that offers real work, learning and progression. A single placement can transform a young person’s life, allow you to take on someone you otherwise couldn’t afford and strengthen your business.

Government incentives include

The Government is offering up to £2,000 for taking on a 16‑ to 24‑year‑old apprentice and you’ll have access to 50,000 additional youth apprenticeship places, and support through local job centres and training providers

These reduce wage costs and can make hiring a young apprentice financially viable. However, many small and micro businesses don’t feel the financial incentive is worth the effort involved or don’t have the capacity to supervise or mentor a young person.

Focus on practical skills

Young people who are looking for work opportunities often thrive in hands‑on roles, customer‑facing work, and trades and technical tasks. Digital support, creative and maker roles and hospitality and retail operations are where many traditionally get into the workforce.

Small businesses excel at practical learning and that’s where foundation apprenticeships can shine.

Partner with local colleges and training providers

Many small businesses assume apprenticeships require complex paperwork, but they don’t.

Training providers handle the curriculum, assessments, compliance and reporting. The business provides the workplace experience, and the partnership model can be ideal for micro firms.

Offer flexible, supportive environments

Young people struggling with mental health or confidence need workplaces that are patient and offer structure, provide mentoring, set out clear expectations, and celebrate their progress. Small businesses are often better at this than large corporates.

Shape the Scheme

The system is confusing. Small businesses can influence reforms by responding to consultations on apprenticeships, technical education, youth employment, skills levies and regional apprenticeship funds. You don’t need to write a long submission or answer every question. A few paragraphs explaining what works for you can help shape national policy.

Levy reform

The Fabian Society is proposing reforms to the scheme to make it more attractive with a £311m regional apprenticeship fund allowing employers to use levy funds to cover half of apprentice wages, saving £4,700 per young person and supporting 26,000 new starts a year. If adopted, this would make apprenticeships dramatically more affordable for small firms.

In Return

Small businesses get new talent with fresh ideas, digital skills, loyal employees, lower recruitment costs, stronger community ties and long‑term workforce pipelines. Youth apprenticeships can solve real staffing problems.

Labour’s skills revolution is at risk. Foundation apprenticeships are off to a slow start, but small and micro businesses could turn this around.

By offering one placement, using the Government incentives, partnering with training providers and shaping the reforms, small businesses can help build a system that works for young people and for the UK and local economies and communities.