Director Weekly  As the labour market stagnates, new initiatives to support youth employment are welcome – but government needs to rethink its approach to apprenticeship and employment reform

That tallies with IoD’s research on directors’ optimism and hiring plans. Businesses know all too well how policy decisions over the past two years have pushed up the cost of employment. And the Employment Rights Act is set to make it even harder for employers over the coming months – which is why we’re now calling for four pragmatic changes in the implementation of the Employment Rights Act.

Meanwhile, this week also saw a fresh push to support youth employment. A new Youth Jobs Grant offers businesses £3,000 for every young person hired who has been on Universal Credit and looking for work for six months, while the Jobs Guarantee has been expanded to cover young people up to the age of 24. There’s also an Apprenticeship Incentive of £2,000 for SMEs, for each new hire aged 16-24.

The fact that these incentives stack means that employers could stand to benefit significantly from investing in young workers.

Yet some of the changes announced relating to the Growth and Skills Levy are less welcome. The decision to stop funding management and leadership apprenticeships is particularly disappointing, following on from last year’s move to defund Level 7 apprenticeships.

There were several reasons to protect leadership and management training. First, these are courses that businesses found valuable – as evidenced by healthy uptake in recent years. There’s strong evidence that the UK underinvests in leadership and management training, which is holding  back productivity and growth. It’s also worth noting that the prestige of apprenticeships has increased significantly in recent years, in no small part precisely because they have broadened to include more higher-level apprenticeships and the uptake among more senior roles has increased.

The government has presented the decision as part of a rebalancing of the apprenticeship system towards young people.. The elephant in the room, though, is that there’s simply not enough money in the system to deliver the flexibilities the government promised in its manifesto. Unhelpfully, the Treasury takes a significant slice of the money raised by the Growth and Skills Levy, before providing the Department for Work and Pensions (DWP) and devolved nations with their funding. It means that apprenticeships are funded from a fixed pot – which has created the need to defund existing options to enable the promised new, more flexible, approach.

There are some welcome moves in the latest announcement. Foundation apprenticeships – previously launched in engineering, manufacturing and digital – will extend into hospitality and retail from April 2026. And apprenticeship units in areas such as AI and welding will be made available on a more flexible basis. The list of units fundable under the Levy will be reformed and hopefully extended over time; we would like to see the apprenticeship budget increased in order to allow short leadership and management courses to be added to this list.

Many businesses welcomed Labour’s promises to reform the old Apprenticeship Levy and create a more flexible system. It is disappointing that these reforms are coming at the cost of defunding training which businesses value, while the Treasury holds back a significant chunk of funds raised by the Levy.

Find out more about the changes the IoD is calling for in the implementation of the Employment Rights Act here.