£1.4bn of existing money could help to train 40,000 new engineers
2 April 2025 
The British government and industry must agree to boost investment in training and upskilling of both existing and future workers if the UK is escape its economic and productivity crisis, says an independent panel of experts that has been analysing the situation for the past five months.
The Industrial Strategy Skills Commission, set up last November by Make UK, has brought together businesses, educators and policy-makers to create a blueprint on how to train new and existing talent for British industry. Their conclusions have now been published in a report aimed at solving the UK’s economic and productivity crisis by delivering a highly skilled workforce, trained in the latest technologies, and equipped with the skills to apply them effectively.
UK manufacturing, the report argues, is in crisis, experiencing a dramatic demand for upskilling at the same time as the pipeline for workers and teachers is declining. Companies, it suggests, face a bleak landscape – an ageing workforce with early retirement on the rise, coinciding with a dramatic drop in apprenticeship starts – which have plummeted by 42% since the apprenticeship levy was introduced nearly eight years ago.
The answer, the Commission believes, is for government and industry to agree a “Skills Covenant” that would include short-term measures such as creating £1.4bn of ringfenced skills funding. This would be raised by combining £800m from unspent employer contributions to the Growth and Skills Levy (currently being spent elsewhere by HM Treasury) with revenues from the Immigration skills Charge – more than £650m last year – and spending it on providing skills as was intended when the charge was introduced.
This combined total of £1.4bn could fund 40,000 new engineers, going a long way to filling the 55,000 skills gap in the sector, which is currently costing the UK economy an estimated £6bn every year.
In turn, says the Commission, manufacturers will boost training availability through a workforce exchange, in which they will second staff to education providers. The sector will also develop an electronic work skills “passport”, which will move with employees as they change roles, and will keep a record of all of the qualifications they gather during their careers. Businesses will also commit to using the Careers and Enterprise Company Employer Standards to develop their schools.
The 33-page report points out that a “dramatic” decline in the number of education providers offering high-value courses is exerting extra pressure on the system. Many of these courses have become financially unsustainable. Make UK believes that urgent legislation is needed to revise funding bands – including level 3 engineer and technician apprentice positions – from the current £27,000 to £35,000. This would reflect the real cost of delivering courses in engineering and skilled technical manufacturing.
Rules should also be amended, the organisation suggests, to allow training providers to draw on levy funds for capital investment in machinery and equipment, making it easier to set up capital-intensive subjects such as engineering.
The lack of training availability is also hampering the urgent need for upskilling across the sector. Make UK research shows that more than half of manufacturers intend spending more on upskilling and retraining their employees in the coming five years – essential to growth and making inroads in the 55,000 skills gap in manufacturing. To boost essential retraining, it argues that employers should have access to a tax rebate for investment in accredited skills training in key sectors and occupations identified by the Industrial Strategy Skills Council.
The Commission also sees an urgent need to refocus careers guidance in schools and colleges to include information on apprenticeships and technical training. Alongside this, the University Technical College (UTC) model should be expanded to offer more technical routes to young people which would increase the sector’s talent pipeline dramatically.
“Modern manufacturing and engineering are major drivers of the innovation needed to capitalise on the AI revolution and deliver on the Government’s growth agenda across new green skills technologies and opportunities,” says Robert Halfon, co-chair of the Industrial Strategy Skills Commission. “Yet all of this is at risk if we do not urgently ensure our skills system is properly fit for the 21st century.
“It is critical that we remove the barriers for Britain’s innovative companies from offering skills and apprenticeships, so that the new Growth and Skills Levy provides enough quality apprenticeship opportunities that lead to progression and good employment outcomes,” he adds. “That is why financial incentives through a skills tax rebate, cutting bureaucracy and ringfenced skills funding will make a huge difference. The skills covenant will put skills and apprenticeships first and foremost in the minds of government and business.”
“The Apprenticeship Levy in its current form has been nothing short of a disaster,” comments Make UK CEO, Stephen Phipson. “Apprenticeship starts in manufacturing have fallen by 42% meaning tens of thousands of learners have gone without invaluable training in the last eight years.
“Government is sitting on a pot of cash that should immediately be ringfenced and spent on skills training,” he continues. “The first priority is properly funding courses, so colleges and training providers aren’t put off delivering higher-cost courses such as engineering. There also need to be targeted efforts to recruit experienced tutors to train the next generation in the skills we need now and in the future.”
