The new Growth & Skills Levy – what it means for SMEs

Published: 09 February 2026

From 2026, the Growth & Skills Levy replaces the Apprenticeship Levy in England. The aim is simple: to make skills funding more flexible, more responsive to employer needs, and easier for small and medium-sized businesses (SMEs) to use.

If you already have a basic understanding of apprenticeships, this article focuses solely on what’s changing under the new levy, and what it means for your business. To find out why an apprentice might be the right choice for you, read our article Why choose an apprenticeship as an SME? or speak to a Business Adviser for support with skills and recruitment.

What is the Growth & Skills Levy?

The Growth & Skills Levy is a reformed version of the existing Apprenticeship Levy. While apprenticeships remain central, the new system gives employers more choice in how levy funds can be used to support skills development.

From April 2026, levy funding can be used not just for full apprenticeships, but also for shorter and more flexible training options designed around real business needs.

What’s changing from 2026?

1. More flexible training options

Under the Growth & Skills Levy, employers can fund:

Short courses
Modular training
Targeted upskilling and reskilling

This is particularly useful for SMEs that need specific skills quickly, without committing to a long training programme.

New modular options will draw from existing apprenticeship standards, allowing businesses to focus on priority skill areas such as:

Digital and data
AI
Engineering and technical skills

2. Modular Apprenticeship Units

A key new feature is the introduction of Modular Apprenticeship Units.
Rather than funding a full apprenticeship, employers will be able to purchase bite-sized units of learning that deliver focused skills development. These units are ideal for:

Upskilling existing staff
Filling immediate skills gaps
Supporting productivity and growth

For SMEs, this offers a more agile way to invest in skills while still aligning with nationally recognised standards.

3. Shorter apprenticeships where appropriate

The Growth & Skills reforms also allow for shorter apprenticeship durations in some cases.

Where prior learning or experience is recognised, the minimum length of certain apprenticeships can be reduced from 12 months to as little as 8 months. This helps employees become fully productive sooner while maintaining training quality.

Changes to levy funding rules

Alongside greater flexibility, there are some important rule changes employers should be aware of:

Levy funds will now expire after 12 months, rather than 24
The previous 10% levy top-up for levy-paying employers has been removed
Once levy funds are used up, co-investment for levy payers increases to 25%

These changes mainly affect levy-paying employers, but they can influence how much funding is available for levy transfers to SMEs.

How this supports SMEs

From April 2026, the government will also cover the full cost of apprenticeships for eligible young people under 25 working at SMEs. This will make it easier for young people to find opportunities and remove the burden from businesses, making it easier for them to take on young talent.

Although most SMEs do not pay the levy themselves, the Growth & Skills Levy still matters because it:

Expands the types of training available through the national system
Makes apprenticeships and skills training easier to tailor to business needs
Continues to support levy transfers from larger employers
Encourages stronger local and sector-based skills pipelines

In sectors such as advanced manufacturing, digital, clean energy and health tech, this flexibility is designed to better match training to real workforce demand.

How Business Growth West Midlands can help

Navigating the Growth & Skills Levy doesn’t have to be complicated.
If you’re considering taking on an apprentice, or want to understand how the new levy can support your skills needs, a Business Growth West Midlands Adviser can help. We can:

• Explain what funding and training options are available
• Help you decide whether an apprenticeship is right for your business
• Support you through the process from planning to recruitment

Get in touch with a Business Growth West Midlands Adviser to explore how apprenticeships and the new Growth & Skills Levy can support your business growth.