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Small businesses are being let down by the UK’s skills system despite their crucial role in providing opportunities for young people.
Rising employment costs are putting pressure on small firms to do more with less and training is increasingly one of the areas being cut, the Federation of Small Businesses (FSB) warned.
According to its research, 32% of small business employers have cut their training budget due to increasing tax bills, and 27% have reduced training because of spiralling labour costs.
In addition, although 80% of small businesses that recruited apprentices in the last three years hired a 16 to 24-year-old, employment costs (28%), training and assessment costs (22%), management time (22%) and paperwork (21%) are barriers for small firms that want to take on apprentices.
Small firms keen to engage with educational establishments, FSB said, with 57% working with at least one part of the education, skills, or welfare system in the past three years. However, there is significant untapped potential as 43% are not engaging at all.
The FSB called on the government to take actions including:
- Introducing one-off payment to employers hosting their first work experience placement.
- Cut the barriers preventing small businesses from hiring apprentices, with better support from training providers and national coverage of apprenticeship brokerage systems to pair up businesses with young people at a local level.
- Provide support for small firms to engage with schools to help them provide work experience through a simple match-making service.
- Create sector skills networks to help employers find the best training providers and courses.
- Introduce an SME training tax credit that covers 20% of the training costs when done by an accredited provider.
Speaking on the day 2026 A Level and T Level results were announced, Tina McKenzie, FSB’s interim national chair, said:
“Today is a milestone for hundreds of thousands of young people as they collect their A Level and T Level results and look ahead to what comes next. For some that will mean university, but others will take their first steps into work. These young people need a clear route to develop their skills and build their own successful careers.
“Small businesses already do a great job of taking on this fresh talent, but there needs to be a renewed focus by the government on backing small firms and making the process easier for employers.
“It’s good to see the new government’s focus on technical education, but the skills system must reflect the needs of small businesses. Initiatives like creating a new partnership to link up employers with young people and help them provide work experience, helping find the right courses, and creating a more small business friendly apprenticeship system would be invaluable.
“The right skills support can help small employers grow and build a stronger economy across the UK.”
