The long-awaited transformation of apprenticeships is in the process of becoming a reality, promising more routes into employment and greater opportunities for young people. The reforms are premised around more investment in routes into education and training for artificial intelligence, engineering, and the government’s IS-8 priority sectors.
Expanding entry routes will make it easier for more young people to access education and careers, broadening participation, addressing skills gaps and supporting long-term economic growth. This is undoubtedly positive for young people and for the future workforce in these critical areas.
But what do the changes to the growth and skills levy mean for universities as institutions, given that they are large contributors via payroll? This question requires thinking about how universities have actually been spending their funds – and what needs to change to ensure that funding pots are used effectively in the revised system.
A problem of underspend
Back when it was still called the apprenticeship levy, research from the UK Institute for Technical Skills & Strategy detected signs of multi-million-pound underspend on the part of universities and research institutions.
Our research estimated that most universities were using less than 25 per cent of their available levy funds, with the amount unspent ranging from £30,000 to £4m per institution each year – evidence, perhaps, of a limited engagement with the apprenticeship landscape.
Reasons for this significant underspend include over-reliance on traditional career pathways, a lack of engagement with apprenticeships in broader workforce planning across faculties and departments, and simply the administrative burden of managing apprenticeships.
This does mean, however, that there is an opportunity to embed apprenticeships into workforce development plans – both for attracting new talent, and for developing and retaining existing technical expertise.
But the ongoing growth and skills levy reforms could prevent us addressing these challenges. Mid-career pathways are being removed, meaning that higher education institutions are left with fewer meaningful options for spending levy funds on their existing workforce.
The missing middle
While the focus on career entry is positive, we must not ignore that almost 30 per cent of the technical workforce in higher education is aged over 50. This presents a growing risk in university teaching spaces and research laboratories, and one that the imminent defunding of level 5 and 6 leadership standards will only accelerate. Emerging and developing leaders are not optional in higher education.
This growing “missing middle” is made up of skilled professionals responsible for managing research laboratories, leading advanced facilities, and supporting the delivery of higher education programmes. Technical leaders translate specialist expertise into operational leadership, maintain continuity, and ensure that complex research and higher education teaching environments function effectively over time.
Retaining technical talent is increasingly challenging, and accessible high-level apprenticeships have been vital for career progression and reskilling in response to emerging technologies.
Given the UK is projected to need 120,000 new technicians in the digital and technologies sector by 2035, the system risks strengthening entry-level supply while weakening the capacity needed to scale and retain talent in critical areas over time.
A narrowing window for action
Now these changes have come into force, there’s a window of opportunity for universities to work out how to utilise the levy as a strategic workforce tool, not just a funding mechanism.
From 1 August 2026 levy funds will expire after 12 months, rather than the previous 24 months – forcing faster use of budgets.
Universities will continue to pay into the fund, but the 10 per cent top-up from the government will end, meaning only the exact amount of an institution’s own contributions will be available. For universities, where decision-making is often complex and multi-layered, unspent funds could expire if not used.
Higher education is experiencing a double hit: losing vital talent due to the aging workforce and, as providers of apprenticeships, seeing reduced income streams where standards are due to be defunded.
To mitigate this, institutions need strong employer apprenticeship leadership, clear internal advocacy for investment in existing staff, and the embedding of skills gap analysis within workforce planning.
Coordination between HR, finance, and academic and technical departments will be essential to ensure workforce planning is aligned with levy utilisation. Routes into apprenticeships can often be unclear and overly complex – they must become more straightforward and visible across the breadth of the workforce. Technical managers and staff across institutions will benefit from better understanding the opportunities available, and the importance of avoiding levy underspend.
It has never been more important to prioritise mid-career development pathways. There is a limited window to make use of leadership and management apprenticeship standards available until September 2026, offering a critical opportunity to invest in our technical leadership and address the risk of growth and skills levy underspend.
Universities can make the most of this opportunity where they are able to respond quickly – and strategically – to the reforms. What’s at stake is the sector’s ability to address technical skills shortages in higher education, a challenge which has never been more important.
