Skills charity Enginuity, the former sector skills council dedicated to boosting skills provision in engineering and manufacturing, has issued a new warning, as it sees the United Kingdom’s small and medium-sized businesses (SMEs) bracing for further economic shocks, while already struggling to fund apprenticeships, which threatens the skills provision required to power growth.
The council’s results from its regular “Skills Snapshot” come amid the publication of the latest GDP data, which suggests that the British economy barely expanded at the 2025-end (0.1% in the October-to-December period). While Enginuity’s survey happened before the Iran War, it still presents a disturbing picture: the Keir Starmer government has more than a challenge on its hands, as it needs to keep GDP growth on track this year, with the Iran war likely to push up inflation and hit demand.
Government figures issued in the final week of March 2026 reveal that under-19 apprenticeship starts have fallen to their lowest level in five years. The OECD (The Organisation for Economic Co-operation & Development) downgraded growth forecasts, suggesting that the European country would be worst hit among leading nations from the Middle-East conflict.
Enginuity is worried that a crucial ‘tipping point’ may have already been reached for some sector businesses, despite recent government announcements providing additional financial incentives to ease the business burden and guarantee young people employment or training.
The charity revealed that the true cost of employing an engineering apprentice can exceed £157,000 during the three-year programme. Its “Policy Centre for Supply Chain and SMEs,” which commissioned the research, was established to amplify the voice of smaller British companies, to senior officials and will now feed the survey findings to the Starmer administration as a matter of urgency.
Among the key findings, 25% of respondents did not employ any apprentices at all. Additionally, 84% of the surveyed participants said that labour costs were the single biggest pressure forcing them to raise prices, followed by energy and utility costs and raw materials at 61%.
“More than 60% were pessimistic (on January 26) about the year ahead – even before the outbreak of war. 60% cited a lack of technical qualifications as a challenge to recruitment,” the report stated.
“The importance of SMEs is often hugely underestimated, making up more than 99% of all businesses in the UK and more than 95% of the manufacturing and engineering sector. Survey respondents (more than 250 companies) employ a total of 10,000 and generate £1.9 billion to the UK economy,” said Ann Watson, CEO of Enginuity.
“It is a mixed picture, but for many in the sector, the situation was bad to begin with. But it has got a whole lot worse in recent weeks. The current energy crisis due to the war in the Middle East is piling more economic pressure on us. Direct contact with many organisations in recent days makes us extremely concerned. With 25% of respondents not employing any apprentices at all, and others telling us that they may stop employing them, this could prove disastrous for the skills system in the UK,” she observed.
Explaining things further, Chris Houston, Managing Director of Tadweld, a leading steel fabrication and engineering company, said, “In 2023, the minimum wage for an apprentice welder was 6 pound/hour. Whilst that may seem low, apprentices attend college one day per week, and we pay them for that time too. They’re in training for most of the time they are with us, working alongside a skilled fabricator, so we’ve always seen apprentices as an investment rather than an employee able to produce high volumes of work.”
“In 2024, the apprentice NLW increased to £7.50/hour, and then in 2025 it increased to 10 pound/hour. That’s a staggering 66% increase in 2 years. It makes offering apprenticeships exceptionally expensive,” he concluded.