From education to employment

SME Engagement in Apprenticeships isn’t just a UK Problem

Lou Doyle

As a founder of Mesma; a small business known for recruiting and advocating for a range of routes into work, it’s always good to read any report that focuses on the involvement of SMEs in apprenticeships.

At a system level, both England and Australia periodically face similar challenges. Declining participation, patchy completion rates, and the struggle to align training systems with economic priorities will be familiar issues to FE News readers. Yet, for small and medium enterprises (SMEs)—the backbone of both nations’ economies—apprenticeships represent a vital but diminishing pathway to nurturing skilled talent and I fear the current economic forecast will impact on this further.

Last week, the Australian government ‘Skills for tomorrow: Shaping the future of Australian Apprenticeships’  final report was published, called for a renewed focus on SMEs to reinvigorate engagement in apprenticeships.

The report highlights that large employers represent around 5% of all businesses that hired an apprentice, hiring 38% of all apprentices, SMEs represent 95% of all businesses that hired an apprentice in the same period but hired about 60% of all apprentices in 2023. Whilst a like-for-like comparison on available data isn’t as easy as we might hope, the Resolution Foundation reported only 41% of apprenticeship starts were with SMEs in England based on 2022 data.

In releasing the report the Minister for Skills and Training, Andrew Giles said;

“It is essential that we get the Australian Apprenticeships system right. We need to have a system with more apprentices finishing their training and gaining the skills and qualifications that we need in our workforce.”

Shared Challenges

The challenges for SME engagement in Australia will be familiar to anyone reading in the UK as the issues the report highlights exist in all four nations to varying degrees.

The report highlights:

  1. Financial Barriers SMEs often operate with limited resources, making the cost of hiring and training apprentices a significant burden. Expenses related to wages, equipment, and travel for apprentices can deter SMEs from participating in the system. Moreover, inflationary pressures have further increased these costs, exacerbating the financial strain.
  2. Limited Access to Support SMEs frequently struggle to navigate the complexity of apprenticeship incentives and support services. Unlike larger businesses with dedicated HR resources, SMEs often lack the capacity to fully utilise available programmes, leading to missed opportunities and underperformance in apprenticeship participation.
  3. Workplace Preparedness Many SMEs are inexperienced in managing apprenticeships. They face challenges in providing the structured mentoring, supervision, and training required to ensure a positive and productive apprenticeship experience. Poorly prepared workplaces can lead to higher dropout rates among apprentices, further disincentivising SMEs from engaging in the system.
  4. Completion Rates SMEs experience disproportionately low apprenticeship completion rates compared to larger organisations. With the factors highlighted above contributing to this.

Recommendations to Address SME Challenges

Alongside the well-worn path of ‘reducing complexity’ the report outlines several  recommendations to improve SME engagement in the apprenticeship system:

  1. Targeted Financial Incentives – Direct quarterly employer incentives exclusively to SMEs hiring apprentices in priority occupations, ensuring the funds are used where they have the most impact.

“We heard that for many large businesses, decisions about apprentice intakes are based on business need rather than government incentives. Incentives could be better directed to supporting small and medium employers (SMEs) to take on more apprentices. These resources could also be put towards an innovation fund which supports projects to incentivise large businesses to create more high-quality apprenticeship opportunities within their supply chain and, more broadly, to enhance the diversity and success of apprentices.”

  1. Cost-of-Living Support for Apprentices – Increase financial support for apprentices to alleviate cost-of-living pressures, including tools and equipment subsidies, indexed payments to account for inflation, and enhanced travel and accommodation allowances for regional apprentices.
  2. Pilot Programmes for SME Engagement – Leveraging the long-standing group training organisations (GTOs) to support SMEs in onboarding and managing apprentices. This includes providing supervisor training, coaching, and resources to improve workplace readiness, limiting access to SMEs who have not engaged in apprenticeships over the past two years, and with a focus on industries with critical skills shortages.
  3. Improving Workplace Culture – Introduce accreditation models to recognise SMEs that demonstrate good employment practices and provide safe, inclusive workplaces. This includes creating “apprentice-ready” certifications that SMEs can attain through short courses.
  4. Incentivising Large Businesses to Support SMEs – Establish an innovation fund to encourage large businesses to collaborate with SMEs, offering mentorship and resources to strengthen the apprenticeship experience within their supply chains.

Next steps

In England, there are certainly examples of attempts to turn the tide on SME engagement; I only have to look as far as the excellent work of the North East Combined Authority where our head office is situated, and events I’ve attended with the Federation of Small Businesses to know they understand the problem. But we need more at a national level to go beyond any marginal gains and tip the narrative back towards one of appreciating the key role SMEs play in upskilling young people and adults.

Like the UK, SMEs are vital to the success of Australia’s apprenticeship system and the economic success of regions, yet they face barriers that larger organisations often bypass. Could tailoring incentives, providing further practical support, and reducing complexity make a difference here too? I look forward to seeing which make their way into policy and practice.

By Louise Doyle, Chief Executive Officer of Mesma, and the current National Apprenticeship & Skills Awards North East Skills Champion. Both a T Level and Apprenticeship Ambassador.


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