Apprenticeship reforms, age caps and the Growth and Skills Levy: why social mobility must stay in view

The Government is right to modernise the skills system. The Growth and Skills Levy is intended to make levy funding more flexible, with new products such as foundation apprenticeships and short, modular “apprenticeship units” – as discussed in our recent blog on the topic.

For Cambridge city region—where the economy is driven by world-leading health and life sciences, high-value professional services, and fast-growing tech—skills policy shapes whether local people can access good work, progress, and continue to live in the region as the cost of living rises. All key priorities for Cambridge Ahead.

There is a risk, however, that some reforms push in opposite directions, with unintended consequences for wider government ambitions for growth. In particular, apprenticeship reform has social mobility implications that government should consider explicitly, not as an afterthought. That is particularly true for Level 7 age caps, and for changes that make training more expensive once levy funds are depleted.

And key reforms are underway:

  • From 1 January 2026, new Level 7 apprenticeship starts will only be eligible for government funding if the apprentice is aged 16–21, with limited exceptions for some under-25 care leavers and those with an EHCP (Education, Health and Care Plan).
  • From April 2026, the first wave of apprenticeship units will be introduced, initially focused on critical skills areas such as digital, advanced AI and engineering.
  • From 2026/27, levy mechanics will tighten: Government plans to remove the additional 10% top-up, shorten levy fund expiry from 24 months to 12 months, and reduce government co-investment from 95% to 75% for levy-paying employers once they have exhausted the funds in their account (meaning the employer share becomes 25% in that scenario).

 

Why this matters for the Cambridge economy

Cambridge Ahead has consistently argued that a pipeline of people with the right skills is essential, and that the region faces acute shortages. Evidence on local demand points to pressures across life sciences, health and social work, and digital-related roles.

A well-functioning apprenticeship system helps on two fronts at once: it supports entry into skilled work, and it enables progression for those already in work—often those people who did not take a traditional, linear route.

That is why the combined effect of changes matters. We may widen flexibility at the “bite-sized” end of training, while narrowing access at the advanced end, and simultaneously increasing the marginal cost of training for levy-paying employers whose needs exceed their levy pot.

 

What is changing—and where the pressure points are

  • Apprenticeship units: real potential, if the system stays low-friction

Short courses, now also characterised as apprenticeship units, could become a useful tool to address fast-moving skills gaps. Our member and stakeholder consultation suggests appetite for something that is genuinely modular and responsive. Providers and employers emphasise that success depends on design: units should not be burdened with apprenticeship-style audit intensity or rigid performance metrics that suppress uptake.

There is clear relevance to priority sectors for Cambridge. In life sciences, employers pointed to demand for short technical training (new lab techniques and compliance), alongside commercial skills and introductions to drug development. Employers value formats that fit around work—micro-modules, half-day sessions, and short intensive bursts—and they see particular benefits for mid-career professionals and returners.

This is the right direction of travel. But it should be treated as a complement to full apprenticeships and clear progression routes, not a substitute.

  • Level 7 age caps: narrowing the top of the ladder

Government has set out that, from 1 January 2026, Level 7 funding will be limited to 16–21 year olds, with under-25 exceptions for care leavers and EHCP holders.

In practical terms, graduates often leave university at 21 or 22, and factors like placement years, Masters study or different degree structures can push people above 21. An age cap creates an “in or out” divide within one cohort.

The deeper issue is social mobility. Many young people—especially those from disadvantaged backgrounds—do not move through education and into work in a straight line. They may work to fund study, take on caring responsibilities, or move into a profession after time in other roles. Restricting funded access to advanced training to a narrow age window risks privileging those who could progress quickly, and penalising those who needed time.

  • A new cost cliff for levy-paying employers: training becomes more expensive once levy funds run out

Alongside the age cap, Government is changing the financial “shape” of the levy system. The levy threshold remains an annual pay bill over £3 million (0.5% of pay bill).

From 2026/27, Government plans to remove the extra 10% top-up, shorten fund expiry to 12 months, and reduce government co-investment to 75% for levy-paying employers once they have exhausted all the funds in their account (so the employer contribution rises to 25%).

This matters because it creates a sharper “cost cliff”. If a levy-paying employer’s training demand exceeds their available funds—especially under a shorter expiry window—the marginal cost of additional training rises quickly. That is not just a budgeting footnote. It can change behaviour.

For Cambridge, many of the employers we rely on for sustained training effort—particularly in life sciences, health innovation, and professional services—sit above the Levy threshold. And inflation means that the £3m threshold itself attracts an amount of fiscal drag. When costs rise, employers typically become more selective: they prioritise training that is mandatory or has a fast payback, and squeeze what is developmental, longer-term, or aimed at widening access.

There is also a competitiveness angle. Some firms are already exploring offshoring elements of work to address domestic skills shortages, and limiting access to funded Level 7 training could accelerate that trend. This risk is not confined to one sector. Where tasks are globally mobile, extra cost pressure can tilt decisions on where activity is located.

 

Social mobility: the risk is a squeeze at both ends

Taken together, these reforms risk narrowing opportunity in two ways.

First, who can progress to advanced training. If Level 7 is effectively limited to those who reach that point by 21 (with limited exceptions), advanced apprenticeships become less accessible to people with non-linear routes—precisely the group the system should keep in view.

Second, how much training employers will fund in practice. If levy-paying employers face higher costs once their funds are exhausted, plus faster expiry and loss of the top-up, some may do less training overall. That, too, tends to hit those with the least social capital first: career changers, returners, and those who need structured employer-backed training to move up.

Apprenticeship units can help widen access, particularly for mid-career workers and returners, but only if they sit within a coherent ladder. Short courses work well as “bridge” learning and a way to try out topics before committing to larger qualifications. If the top of the ladder is pulled away, the whole structure weakens.

 

Considerations for Government

1) Revisit the Level 7 age cap with social mobility in mind
Government should reconsider whether 21 is the right threshold, given real graduate ages and non-linear routes into professional careers.

2) Keep apprenticeship units genuinely usable—especially for SMEs and mid-sized firms
Administration must be proportionate, and funding rules simple and navigable, otherwise uptake will suffer.

3) Monitor and mitigate the levy “cost cliff” for levy payers
Government should track whether the shift to 75/25 co-investment—combined with the shorter expiry window and loss of the top-up—reduces apprenticeship volumes among levy-paying employers in priority sectors. If it does, Government should set out mitigations.

4) Test impacts across priority Cambridge sectors, not only in one profession
Policy has to work for life sciences and health innovation as much as it works for professional services. The system should support both entry and progression across these sector realities.

 

Closing reflections

The Growth and Skills Levy reforms are a chance to make training more flexible and more responsive. Apprenticeship units could become a practical way to plug gaps quickly, if they are designed with agility and low friction at their core.

But flexibility should not come at the cost of fairness. A system that age-caps advanced apprenticeships and makes training materially more expensive once levy funds are exhausted risks narrowing routes that have helped people without a straight-line path into professional careers. Government can avoid that outcome, by treating social mobility as a design constraint, and by stress-testing reforms against how real lives, and real employers, actually work. Cambridge, as an environment in which innovative sectors are at the forefront of driving growth – and one with a high growth, but high pressure labour market – will be a key testbed for the effects of a changing skills system – and we will continue dialogue with our members and government to ensure employer voices are heard.