This report sets the context of longstanding megatrends impacting the UK’s world of work, arguing that skills development policy is the key policy lever needed in response. It compares and summarises current labour market and skills challenges across the four nations as well as employer approaches to training, and provides an overview of key public policy developments. 

The second half of the report focuses on our apprenticeship systems. These have seen the biggest evolution and divergence since 2017 and therefore offer a useful case study.  

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Key findings

• Skills and labour shortages continue to impact employers across all four nations and virtually all sectors of the economy. In addition to this, skills gaps, mismatches and underutilisation point to persistent inefficiencies between the labour market and the skills development system.  
• Employer underinvestment in staff training – both in quantity and quality – is a serious problem across the whole of the UK.  
• England’s apprenticeship system has diverged considerably since 2017. It has at least three times as many standards as the other three nations.  
• England and Wales have nearly double the participation rates of apprentices per 1,000 employees compared with Scotland and Northern Ireland.  
• There has been a 31% decrease in the number of apprenticeship starts between 2015/16 and 2021/22 – a drop of over 160,000 – in England.  
• With the exception of Northern Ireland, apprenticeship provision is increasingly concentrated among older apprentices.  
• In Scotland, the number of apprenticeship starts aged 25+ has doubled since 2015/16 (an increase of over 5,400), but the number of apprenticeship starts by those aged 16–24 has fallen by over 5,800.  
• The UK business population is dominated by SMEs (99%), with the majority of private sector employment (61%) also concentrated there. But the number of apprenticeship starts for small businesses in England is 45% below pre-Apprenticeship Levy figures.   

Key recommendations  

• Reform the Apprenticeship Levy into a Flexible Skills Levy.  
• Develop devolved ringfenced funds for Levy-payers to use on programmes beyond apprenticeships, along with shorter, funded upskilling opportunities aimed at individuals.  
• Support the delivery of good quality advisory services for the smallest of businesses, including interventions aimed at boosting management capability.  
• Provide UK-wide advice to employers that operate cross-nationally on how to navigate the skills development landscape.  
• Apprenticeship policy needs to include a discussion on the role of direct financial incentives alongside a focus on funding off-the-job training.  
• Support small businesses by providing apprentice hiring incentives.  
• Ensure public bodies tighten controls on the development of English apprenticeship standards, and focus on quality of provision.  
• All four nations should specify that apprenticeship programmes be at least two years long (with some exceptions), with set minimum off-the-job training days as a percentage of the programme.  
• Widen access to apprenticeships for those with limited qualifications by increasing focus on traineeships and other pathways that can lead to apprenticeships.  
• Ensure apprenticeships are positioned as vocational pathways (not upskilling opportunities) that provide young people with in-depth quality training and experience in a workplace setting.  
• Introduce fast-track routes to apprenticeship qualifications for adults with existing on-the-job skills. In addition, new master craftsperson qualifications should introduce a level of progression for adults.