The government is being urged to ringfence its planned Growth and Skills Levy funding of higher and degree apprenticeships, to narrow the skills gap employers are experiencing.

The University Vocational Awards Council (Uvac) has said its data shows that employers are more dependent than ever on funded apprenticeship programmes between levels 4-7, which have experienced a 9% increase in year-on-year starts in the past three years.

Level 7 apprenticeship starts have seen the highest increase (13%) in the same three-year period, closely followed by Level 4 (12%), Level 5 (10%) and Level 6 (3%).

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A member survey conducted by Uvac, which represents more than 80 universities on apprenticeship issues, also revealed that 42% felt that if funding was not ringfenced, the Growth and Skills Levy (formerly the Apprenticeship Levy) would make it harder for businesses to plug skills gaps.

About a third (30%) claimed the levy has added to bureaucracy and administration for employers, while 48% believed it restricts higher and degree apprenticeship provision and caters for fewer sectors.

Research by The Open University and British Chamber of Commerce revealed that 64% of employers were not confident of applying either artificial intelligence or green technologies across their business because the skills gap was compromising productivity and preventing businesses from competing, nurturing talent and driving growth.

Dr Mandy Crawford-Lee, chief executive for Uvac, said: “With employers and the wider economy so reliant on higher and degree apprenticeships to plug skills gaps, develop a sustainable talent pipeline or fill specialist roles, we’re urging the government to protect Growth and Skills Levy funding in this area. While apprenticeships are not the only solution, they provide an in-work route to the professions and advanced practice careers up to and including post-graduate and master’s degree levels.

“Given that recent cuts to levy funding of Level 7 apprenticeships in January next year will also cost employers around £214m in additional training costs, there’s no need for the government to further deepen the skills void.

“In addition to protecting funding, we feel the focus now should also be on defining the government’s intentions around its plans to provide greater flexibility to employers. It feels like businesses are in a state of limbo at the moment. The government appears to be prioritising lower-level apprenticeships designed for people not in employment, education or training, but not providing the clarity or reassurance to those businesses that need apprentices across all ages to meet the critical skills challenges they face.”

The Growth and Skills Levy applies to employers with a wage bill over £3 million a year. These employers pay 0.5% of their total payroll into a training fund via HMRC, which they can access through the Apprenticeship Service. Since April 2025, when the name change from Apprenticeship Levy was made, levy funding has been channelled to support a wider range of training options.

The government confirmed in spring that from April 2025, 50% of levy funds must still be used for apprenticeships, while the remaining 50% can be directed towards other approved training, such as Skills Bootcamps and modular technical courses. However, a lot of the details surrounding the new Growth and Skills Levy mechanism have not been finalised and are unlikely to be until 2026, said Uvac.

In June, Uvac warned that the government’s decision to cut Level 7 apprenticeship levy funding for apprentices aged over 21 would mean UK employers footing the bill for £214 million of additional training costs.

Level 7 apprenticeships, which are equivalent to a Master’s degree and help firms to upskill and develop future managers, business leaders or fill specialist roles, have been increasing in popularity. However, education secretary Bridget Phillipson announced in May that from January 2026, only people aged 16-21 can be funded.

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