Budget 2026: What the Chancellor Announced for Skills, Apprenticeships and Young People

The Budget 2026 confirms £100 million to take apprenticeship brokerage to every mayor in England, a 3.9% rise in the National Living Wage and new investment the Treasury says will support thousands of jobs, as unemployment is forecast to peak next year

The Chancellor delivered Budget 2026 today, setting out measures to get more young people into work against a forecast rise in unemployment. The Office for Budget Responsibility expects unemployment to rise to 5.1% in the second quarter of 2027, before falling to 4.1% by the end of the forecast period. Total employment is expected to grow from 34.4 million in 2026 to 35.4 million in 2031.

The Budget states that nearly one million young people are not in education, employment or training. The government will respond to Alan Milburn’s final report on young people and work, and to the Timms Review, before the end of the year, with a White Paper to follow early in 2027.

Getting young people into work

The main new measure is £100 million across 2027/28 and 2028/29 to expand the Mayoral Apprenticeship Brokerage Pilots from 7 to 14 Mayoral Strategic Authorities. According to the Budget document, this will allow every current mayor to give tailored support to young people looking for apprenticeships and to help employers, particularly SMEs, create more opportunities. The government launched a competitive call for the pilots in July, and Budget 2026 extends that offer to every area with a mayor.

The government also confirmed funding for the Youth Employment and Skills Package announced in the spring. It includes the £3,000 Youth Jobs Grant for businesses hiring eligible young unemployed people, an extension of the Jobs Guarantee to 22 to 24 year olds on Universal Credit, and a £2,000 payment for non levy paying employers taking on young apprentices.

Apprentices on government projects

The Budget introduces a requirement for at least 3% of the workforce on all large government construction and infrastructure projects to be apprentices. A new National Procurement Policy Statement, due to be laid in Parliament in March 2027, will prioritise high quality jobs, fair pay and skills opportunities, including pathways for young people. The government says its updated Infrastructure Pipeline, due before the end of the year, will set out an expected workforce requirement of over 650,000 people.

Higher wages

On 1 April 2027, the National Living Wage will increase by 3.9% to £13.21 per hour. The Treasury says this is worth an extra £910 a year in gross earnings for a full time worker on the National Living Wage. The National Minimum Wage for 18 to 20 year olds will rise by 3.9% to £11.27 per hour. The rate for 16 to 17 year olds and eligible apprentices will rise by 3.9% to £8.31 per hour.

Jobs in aerospace, defence and life sciences

The government announced plans for a long term cooperation agreement with Rolls-Royce, starting with a joint 10 year, £2.5 billion programme to develop next generation gas turbine technology for civil and defence aerospace. The Treasury says the programme will support 3,300 jobs at Rolls-Royce and its partners by the end of 2029. It will also strengthen engineering skills and testing capability in Derby, the Midlands and Bristol. The Treasury says it could create tens of thousands of further jobs across the supply chain in later decades. The agreement has not yet been contracted, and funding remains subject to negotiation.

The Budget states that the Defence Investment Plan will create around 60,000 new jobs by 2029/30 compared with 2023/24. In Plymouth, £3 million will help young people not in education, employment or training into the local defence industry.

Three new public and private investments in life sciences were also announced, totalling over £1 billion and backed by almost £70 million in government grant funding. Convatec will invest over £500 million in a new global research and development hub in Manchester, Vertex Pharmaceuticals over £300 million in a new facility in Oxford, and Kindeva £200 million in Loughborough.

Training and skills

The Union Learning Fund will return in England with a budget of £15 million a year from 2027/28 to support learning and training among workers. Leeds College of Building will receive funding to expand its campus for more than 2,000 new learners.

Sector Reaction

David Hughes, Chief Executive, Association of Colleges, said:

“There were no surprises in the Chancellor’s budget speech today, with no new investment for further education colleges. It felt like a budget aimed to calm the markets and set the parameters for a tough spending review in 2027. That’s not surprising given the global instability and the financial position of the country. 

“The good news for colleges is that the extra money announced this summer – to fund extra 16-18-year-old students, and support college pay – is secure for this academic year and next. Alongside that, the Chancellor ruled out another austerity drive which would have hit public services, including colleges. That might sound like a small win, but it will be a relief to every college leader. 

“The focus in terms of funding now has to be on the Spending Review where the Chancellor has set out clearly that he will consider how to implement the recommendations of the Milburn review – looking at reducing the number of young people who are not in education, employment or training (NEET) – and the Timms review – looking at how to reform Personal Independence Payments, in order to get more people into work. To help, he made one small statement about introducing new ‘preventative departmental expenditure limits’ which should help him invest in colleges to support more young people to avoid becoming NEET in the first place as well as helping those who are NEET get into work through purposeful learning and training in colleges.

“The announcement of tax-retaining powers for elected mayors will make devolution feel even more secure, and put even more power into the hands of mayors. College leaders will want to ramp up the work they are already doing to be the very best strategic partners they can be with their mayors, and show how they already deliver on their mayor’s priorities, and could do even more with extra investment.”

Stephen Evans, Chief Executive at Learning and Work Institute (L&W), said:

“This was a relatively quiet Budget in terms of policy announcements, barring some extra funding for Mayors to increase apprenticeships, with bigger changes delayed until the Milburn Review and the Government’s longer-term plans. The labour market remains relatively resilient in the face of global events and increased pressure on employers, which the OBR note will reduce employment. But stability risks turning into stagnation without action to tackle underlying weaknesses that have resulted in one million young people not in education, employment or training and a flatlining employment rate. It makes sense to take time to make the right long-term choices, but the clock is ticking.”

Julia Harnden, Deputy Director of Policy at the Association of School and College Leaders, said:

“It’s concerning that the Chancellor spoke for an hour and the word ‘education’ did not pass his lips even once. Successive governments have placed a whole host of new duties and expectations on schools and colleges, while simultaneously squeezing the amount of funding available to them. On the face
of today’s speech, it does not appear that anything has changed with this new administration.

“The government has made clear their ambition to boost vocational education and reduce the number of young people not in education, employment or training. We wholeheartedly welcome these plans, but schools and colleges are integral to their success and they must be funded accordingly. As a share of national income, education spending is among its lowest level since the 1960s and is still seen as a cost rather than an investment in young people and in providing the knowledge and skills required for a thriving economy. Going forward the government must commit to ensuring that schools and colleges are properly resourced to deliver the learning and support that children and young people need, and that any new requirements are backed up with detailed plans setting out the funding required to deliver them and how this will be provided. We cannot go on with new policies announced with much grandstanding, and school leaders left scratching their heads as to how they can possibly deliver them. In future, rhetoric has got to be matched by resources.”

Ben Harrison, Director of the Work Foundation at Lancaster University, said:

“It is welcome that the Chancellor has today introduced additional short-term measures to ease cost of living pressures and set a direction of travel on delivering good growth in every postcode.
But this risks being a stopgap Budget. It is likely to fall short of the support workers most vulnerable to rising prices need in 2027 and misses the opportunity to lay more of the fiscal foundations for bigger reforms in the future.

“OBR forecasts suggest cost of living pressures will continue to bite well into 2027, particularly for those on low and insecure incomes. Real household disposable income is expected to grow
by just 0.2% in 2027, with inflation expected to hit a quarterly peak of 3.8% next year.
This will mean most workers are unlikely to feel better off, despite a 3.9% rise in the National Living Wage and proposals to give a £100 Council Tax rebate to millions of households to support with energy bills this winter.

“It is also uncertain whether the Chancellor has laid the fiscal foundations to deliver on anticipated major reforms to boost employment and drive-up living standards in the years ahead. Based
on the measures announced today, the OBR estimates the Government will have just £15 billion of fiscal headroom by 2029 – down £7 billion on 2025 figures. With global instability continuing, this buffer could decrease further due to factors outside of the
Chancellor’s control.

“And yet substantial reforms to get more young people into work and deliver a new National Care Service that could enable more unpaid carers to remain in employment are expected to require significant
additional investment. And it remains unclear what impact the Timms Review of health-related welfare support will have on future expenditure, and the kind of support disabled people can access to help them into work.

“By deferring so much of the detail of these decisions to the Spending Review next year, it risks undermining the credibility of these commitments. This could further delay the introduction
of much needed interventions to support more people into secure and sustainable employment.”

Joe Shalam, Policy Director at the Centre for Social Justice, said:

“That was the fudge-it Budget. Faced with a welfare crisis, a million young people out of work or training and communities trapped in poverty, the government has, for now, handed out a few sweeteners and fudged the hard choices until the next review.

“Meanwhile, sickness benefit spending is now forecast to exceed £100 billion by the end of the decade and 6.7 million people are on out-of-work benefits, while the rest of the country is dragged into higher tax to pay for inaction. Public support for the system there to protect the most disadvantaged is being pushed to breaking point.

“A holding position will not fix that. No doubt this will all be addressed in a manifesto that is surely in the post. But Britain cannot wait for an election. When the sugar rush wears off, all that will be left is wasted money and wasted potential.”

Anton Roe, CEO, MHR, said:

“Today’s Budget was the first real test of this government’s relationship with business. The Chancellor wants “government investment up, business investment up, productivity up, real wages up”, and UK businesses will share that ambition. It was a cautious Budget, and after two years of rising costs, many businesses will be relieved there was no rise in employer National Insurance. But with big decisions on tax and spending pushed back to the Spending Review, they still don’t have the long-term certainty they need to plan.

“The Chancellor has talked about giving businesses breathing space, and they need it. Taking 70,000 smaller high street businesses out of business rates is welcome. But over the past two years, employers have faced higher National Insurance contributions, steep rises in the minimum wage and rising energy costs, with more of the Employment Rights Act still to come. Many have already had to cut jobs to cope. Britain’s biggest firms have cut or announced plans to cut more than 130,000 roles since July 2024, according to analysis by City AM reported this morning. If the UK is to stay competitive, the government needs to do more to create the right conditions for growth.

“Young people should be at the centre of this. Close to a million 16 to 24-year-olds in the UK are not in education, employment or training. Many employers want to hire young people, but the cost of taking someone on has risen sharply. The Chancellor’s decision to slow the rise in the minimum wage for 18 to 20-year-olds is a net positive step. Young workers still get a pay rise, but employers won’t face another barrier to taking them on.

“As a tech business based in the Midlands, we want to see growth reach every part of the country. Today’s plans to give mayors a share of business rates and income tax are encouraging, and we’ll be watching to see the Midlands benefit as much as other regions.

“HR and finance teams will now be the ones turning today’s announcements into action, from modelling next April’s pay bill to the employment law changes already under way. Leaders need to give these teams the time, tools and training to do this well. And with a clear long-term plan from government, businesses will have the confidence to invest, hire and grow.”

Lee Biggins, CEO and Founder of CV-Library, said:

“Reducing business rates is a welcome step, but the Government must not mistake easing one cost pressure for solving wider challenges facing high street businesses. With retail employment down by around 410,000 jobs over the past decade, according to ONS figures, there is a clear need for action that supports not just high streets, but the jobs and opportunities they provide.

“Retail and hospitality are vital entry points into the workforce, particularly for young people taking their first steps into employment. When businesses are under pressure, recruitment can become one of the first areas to suffer, leaving fewer opportunities for people to gain experience, develop skills and build careers.

“We will need to see the detail behind the Government’s plans for the British Business Bank and wider investment measures to understand whether they can genuinely unlock the level of business investment needed to create 140,000 new jobs. Greater access to investment is certainly welcome, but it is only part of the solution.

“It is encouraging that there are no major new costs being placed on employers in this Budget. However, there appears to be relatively little that directly improves the conditions for hiring either.

“The real test of these measures will be whether it gives businesses the confidence to invest and hire, not simply whether it reduces their bills. The Government must go further in tackling the wider costs of employing people and give businesses the certainty to create jobs.

“A thriving high street doesn’t just support economic growth; it creates opportunities for jobseekers to enter the workforce.”

Jack Kennedy, Senior Economist, Indeed, said:

“A largely ‘steady as she goes’ Budget without major curveballs allows employers to plan with a little more certainty. Measures to slow minimum wage increases for younger workers and to expand apprenticeship support are sensible steps towards getting more young people into employment.

“But support for jobseekers only goes so far if employers aren’t hiring. Indeed data shows UK job postings are down 8% year-on-year and remain almost a third below their 2020 baseline. Meanwhile graduate job postings are down around 12% year-on-year. 

“Early-career support can help people build the skills employers want, but businesses need to have the confidence to recruit. The test of this Budget is whether it does both: helps people into work and gives employers the conditions to turn recruitment plans into real opportunities.”

Kevin Fitzgerald, UK MD, Employment Hero, said:

“There were some welcome measures for small businesses in today’s Budget, but there is much more to do. 

“Business rates relief for many more of Britain’s SME is welcome news, especially for businesses in the North we spoke to earlier this month. Alongside those who called for business rates relief, nearly half also asked for support with hiring and training new staff and apprentices.

“Apprenticeships are a great way for young people to get their first foothold in work, so I’m hoping to see more support here following Milburn’s report. We must remember that for a small business, training an apprentice takes time and money before the investment pays off, which is why many are looking for candidates with previous experience. Support that helps SMEs sustain the investment long term can turn an entry-level opportunity into a lasting career.

“A 3.9% increase in National Minimum Wage will make some employers nervous. Everyone deserves a living wage, but the package needs to recognise that wage policy and the wider cost of employing people are closely linked. When the minimum wage rises, so does the cost to the employer, meaning businesses with already tight budgets will feel the squeeze even more.”

Maxine Bligh, Interim Chief Executive at the Recruitment and Employment Confederation (REC), said:

“Today’s Budget will leave jobseekers waiting far longer than necessary for a strong jobs recovery because the government is still not creating the right conditions for firms to grow, hire and
invest with greater confidence.

“The Chancellor has failed to hit the bullseye on business confidence to hire today.

“There is still too much regulation landing on employers’ desks because of employment reforms that place process ahead of practical outcomes. The government should have exempted agencies from
guaranteed hours rules to help young people keep entering the labour market through temporary work. Critically for employment costs, the Budget does not provide a broad phased restoration of the employer National Insurance threshold. Employers are also still
waiting for greater flexibility within the Growth and Skills Levy and increased support for shorter, targeted training programmes. Together, those measures would have done far more to encourage hiring and investment.”

“The small business rates relief for retail, hospitality and leisure will help in the short-term. Our latest Report on Jobs shows retail recruitment has been under pressure for some time, with
both permanent and temporary retail vacancies last in growth territory in July 2023. In hospitality, permanent vacancies last increased in August 2024 and temporary vacancies in December 2024.

“Yet the rises in minimum wage rates announced today are an additional pressure on embattled employers already facing daily pressures from geopolitical uncertainty and escalating costs of doing
business. Government must not allow the National Minimum Wage to become a disincentive to hire younger jobseekers.

“There is still too much delay in taking the big decisions that could help get the jobs market firing.”

Katerina Kolyva, Chief Executive of ETF, said: 

“From 2028, mayors’ budgets will increasingly depend on local jobs and earnings. That gives every mayor a direct stake in skills, and makes further education colleges and training providers, and the teachers, trainers and leaders within them, part of every mayor’s growth plan. 

“The Government’s ambitions on growth, skills and young people will be delivered by the workforce behind the workforce. The Budget itself recognises the need for stronger technical and vocational skills, and that starts with investing in the people who teach them. A growth strategy without investment in the skills workforce is a strategy without a delivery plan. 

“We are calling for a national FE and skills workforce strategy: one that attracts industry experts into teaching, keeps experienced staff, and gives them the professional development to keep pace with industry.” 

Michael Lowe, Director of People & Sector Workforce at ETF, said: 

“With nearly one million young people not in education, employment or training, and the Government committed to responding to the Milburn Review by the end of the year, today’s Budget had to lay the groundwork.  

“The Jobs Guarantee and support for employers who hire young people are a start, and the Budget is right that the system should be a springboard for young people, not just a safety net. Most of these young people want to work, learn or train. For many, the FE and skills sector is that springboard, where they get second and third chances, and it is the teachers and trainers in colleges and training providers who make those chances real. 

“When the Government responds to Milburn, the test will be whether it makes clear who is responsible for keeping young people in education, training or work, gives funding that reflects what that really takes, holds the system accountable for their progress, and works for those facing the greatest barriers. The other key test for both today’s Budget and the Milburn response, is whether the Government gives businesses the confidence to create many more employment opportunities for young people.” 

Ann Watson MBE, CEO of Enginuity Group, said: 

“The Chancellor was correct to recognise the significant pressures facing businesses. Our most recent Snapshot Survey revealed that 80% of engineering and manufacturing SMEs faced pressure to raise prices due to increasing labour and raw material costs.

“The number of SMEs in the sector under pressure to raise prices due to energy costs had also more than doubled since the previous survey. The Chancellor’s actions to reduce energy costs facing employers is therefore certainly a welcome step. However, greater emphasis must now be placed on reducing the wider costs SMEs face, so they are able to create more jobs and invest increasing amounts in training the next generation.  

“Over the coming months, we look forward to greater clarity on the Government’s commitment to tackling youth unemployment. Right across the UK, many young people are struggling to find pathways into work. Meanwhile, around two-thirds of engineering and manufacturing SMEs say they are not running at full capacity.

“If Alan Milburn’s final recommendations are to create more workplace opportunities for young people, government policy must also support SMEs to offer more workplace opportunities. Policymakers should explore targeted financial incentives to directly encourage greater employer investment in skills and training, offsetting those costs that currently hold employers back.”

University of the Arts London Vice Chancellor, Professor Karen Stanton, said:

“The absence of any significant announcement in today’s budget on education and skills leaves important questions unanswered for learners, educators and institutions. Young people deserve greater certainty about the support available to help them invest in their future, while education providers need a stable funding environment to continue delivering the opportunities and specialist skills the country’s growth depends on. 

“As we await the forthcoming Milburn review, we hope to see a long-term settlement that strengthens education and skills pathways, supports participation from people of all backgrounds, and gives learners confidence that opportunity will remain open to them. We will continue to champion these ambitions, helping young people realise their full potential, find meaningful work, and ensuring future generations of creative makers and thinkers have the skills, opportunities and support they need to succeed.” 

Ben Rowland, Chief Executive of AELP, said:

“A clearer timetable for the government’s devolution, skills and employment reforms is welcome. But dates alone won’t give employers and training providers the certainty they need. Ahead of the Milburn Review, big questions remain: what will change, how will the reforms fit together, and will funding for high-quality training, including apprenticeships, match the government’s ambitions?

“The Chancellor’s pro-business rhetoric was encouraging. If government wants more opportunities for young people, it will need to use its forthcoming reviews to ensure this translates into practical support for employers to recruit and train. Ensuring every pound raised through the Growth and Skills Levy is invested in apprenticeships and employer-led training would be a great starting point.”

Vivienne Stern MBE, Chief Executive of Universities UK said:

“It was encouraging to hear commitments to innovation and to improving employment prospects for young people in today’s Budget. Universities are a vital partner of the Government in delivering its growth ambitions in every corner of the country and ministers have been clear about the positive role that universities can play.

“Expansion of the Graduate visa is a welcome recognition that it’s not just universities that benefit from international students but communities and businesses across the country. A single cohort of international students is estimated to generate a net economic benefit of over £833m in Leeds Central and Headingley and £806m in Manchester Rusholme over the duration of their studies, supporting more than 6,000 jobs in each constituency.

“But the rules need to be stable and fair. We look forward to working with Government to iron out the details around eligibility and how compliance and outcomes will be assessed – to make sure that visa processes are fair to all.

“We welcome the Government’s plans on devolution. Our members are already driving growth in every postcode, convening local authorities and communities, including those 30% based outside of mayoral authorities. We would encourage the Government to think more expansively about devolution, considering not just how public investment in innovation can drive local growth but how this can be coupled with private investment and maintaining the funding for national discovery-led research needed to generate ideas and innovation.

“Universities know the world is changing and they are changing too; they’re working to deliver more for students, taxpayers and their local communities. We recognise the challenges that this Budget is tackling but there is more universities can do to support the Government’s ambitions here. For the university sector to have the greatest impact in creating a brighter future for the next generation, we need a long-term plan.”

Sarah Beale, AAT Chief Executive said,

“Devolution and tackling youth unemployment are central to the government’s ambitions. Today’s Budget needed to go further on both.

“At AAT, we know talent is everywhere, but opportunity isn’t. More than 40% of people still don’t know you can become an accountant without a degree.

“The Milburn review and the government’s devolution plans must turn ambition into action: champion proven vocational routes and give local areas the power to build the skills their employers need.

“Accounting and finance offer accessible, rewarding careers in every sector and every part of the country. Get this right and we can help more young people into work, strengthen the workforce and drive growth in every postcode.”