Small firms say Budget aid for apprenticeships falls short

Angelica Solutions has warned that Budget support for apprenticeships does not go far enough for small businesses, saying smaller employers still bear most of the cost of hiring and developing early-career staff.

The criticism centres on the gap between available support and the full cost of taking on a graduate, apprentice or school leaver. Wage costs, supervision time and mentoring commitments remain a significant burden for smaller employers, even where apprenticeship funding or hiring grants are available.

Sarah Vaughan, Founder and Director of Angelica Solutions, said the problem is being compounded by planned wage increases.

"Fully loaded salaries and the time experienced colleagues spend supervising and mentoring a new starter remain a substantial commitment. Moreover, minimum wages and the national living wage are all set to increase by 3.9%, which is above the inflation forecasts of 3.1% this year and 3.4% next year. How are small businesses expected to fund this? Cutting recruitment and training AI agents is looking like a far more attractive option."

Her comments reflect a broader concern among smaller employers that entry-level hiring often requires an upfront investment that takes time to recover. Unlike larger companies, which may be able to absorb the cost of bringing in groups of junior staff and waiting longer for returns, small businesses can find even a single additional salary hard to carry.

Vaughan said the latest measures fail to address that core issue.

"This Budget needed to make it more affordable for small businesses to recruit and develop people starting their careers. The measures announced do not go far enough to address the underlying problem: businesses are being asked to invest in tomorrow's workforce while facing increasing pressure to make every hire pay for itself immediately."

Cost pressure

The challenge affects a wide range of sectors rather than one industry. Angelica Solutions pointed to businesses such as restaurants, insurers and consultancies, where new recruits may need training before they can contribute fully to commercial work.

"Every industry can make a case for special treatment, but this challenge cuts across sectors. Whether you run a restaurant, an insurance business or a consultancy, taking on someone who needs training means paying their salary while committing experienced colleagues' time to helping them develop," Vaughan said.

The issue is particularly acute for smaller firms because hiring decisions tend to be immediate and closely tied to revenue. Larger organisations may have the financial capacity to support graduate intakes over a longer period, but smaller employers often need recruits to become productive much sooner.

"A larger business may have the resources to recruit a cohort of graduates and wait two years for that investment to pay back. For a small business, even one additional salary is a significant commitment and the pressure for that person to contribute commercially starts much sooner," Vaughan said.

Support model

Vaughan said her experience of hiring an apprentice had shown the limits of current support arrangements. In her view, grants and apprenticeship funding can help, but the rules can exclude some candidates and leave most employment costs with the business.

"Having taken on a summer apprentice, I have seen that first hand. Existing apprenticeship funding and hiring grants are welcome, but eligibility can be narrow and substantial employment and supervision costs remain with the business. Someone starting their career at 25 or older still needs an opportunity to learn," Vaughan said.

Angelica Solutions is calling for direct support with employment costs over the first two years of a new recruit's career. It proposes covering 50% of employment costs in the first year and 25% in the second for small businesses hiring a graduate or school leaver into their first substantive job.

"I would like to see meaningful support towards employment costs over the first two years: 50% in year one and 25% in year two for small businesses taking on a graduate or school leaver in their first substantive job, with eligibility that recognises people enter the workforce at different ages," Vaughan said.

Hiring choices

Angelica Solutions said the lack of broader support could push smaller employers towards alternatives such as experienced contractors or automation. While that may ease short-term workload pressures, it does little to build a pipeline of trained workers.

"Without that support, the immediate commercial case can favour an experienced contractor or automating a task over developing someone new. Those choices may solve today's problem, but they do not build the workforce businesses will need tomorrow," Vaughan said.

Vaughan also linked the issue to competition and growth, particularly in insurance, where Angelica Solutions operates. She said smaller firms that cannot afford to develop staff may find it harder to expand or challenge larger rivals across the sector, including consultancies, managing general agents and claims firms.

"The consequences extend beyond recruitment. If smaller firms cannot afford to build their teams, their ability to grow, innovate and challenge established players is constrained. In insurance, that affects businesses throughout the value chain, from specialist consultancies to managing general agents and claims firms.

Helping small businesses develop talent is an investment in future competition and consumer choice. We need an economy in which smaller firms can afford to grow, rather than one where only the largest businesses have the resources to invest for the long term," Vaughan said.