Dave Atkinson, UK Head of Manufacturing SME & Mid Corporates, Lloyds, considers if 2026 could be the year the UK starts to close its manufacturing skills gap.
Is the tide turning?
Regular readers will know I’ve been writing about skills for many years.
Manufacturers are struggling to attract and retain talent amid increasing competition from other sectors, despite there being almost a million young people not in work, education or training.[1]
And it’s a particular issue when it comes to the digital skills needed to integrate advanced technologies, including Artificial Intelligence.
Strategic support
In November, we marked a major milestone in our strategic partnership with Manufacturing Technology Centre (MTC), which plays a key role in developing skills and driving innovation across the sector.
Our collaboration gives manufacturers access to high‑quality training in electrification, digitalisation and clean energy systems, and we celebrated the 10‑year anniversary in 2025. More than 5,000 apprentices, engineers and graduates have been trained across its centres in Coventry, Oxfordshire and Liverpool. The newly announced MTC North Tyneside, opening in 2026, represents the next step in this partnership.
We’ve now extended our support to more than £18.5 million, with a goal to help upskill over 6,500 people by the end of 2029.
MTC’s Apprentice Support Service Programme helps SME manufacturers recruit apprentices and access salary support through the government’s Apprenticeship Levy, and it’s worth exploring how MTC can support you too.
The evolving apprentice opportunity
The last Budget included a welcome reform to the Levy, which comes into effect from April. The Levy is paid by employers with an annual wage bill topping £3 million, who pay 0.5% of their payroll each month, which is ringfenced for apprenticeship training.
The employer paying the Levy can either use the cash themselves, or transfer up to 50% to their suppliers that don’t pay the Levy, to upskill employees or hire apprentices.
Before the reforms, the Levy expired after two years, which will now be reduced to one year. And while non-levy-paying SMEs previously had to contribute 5% of training costs, that will now be completely covered by the government. SMEs also receive a £1,000 Apprenticeship Incentive for each young apprentice, who are exempt from Employers National Insurance during their apprenticeship.
The shorter timeline should focus minds on making the most of the Levy money, accelerate the scheme’s uptake and get more employers signing up for apprenticeships.
Colleges and collaboration
I also continue to be impressed by the important work being done by University Technical Colleges (UTCs). There are now 44 UTCs across the country, which work closely with employers to deliver the skills they need. Students engage with real-world challenges set by employers using industry standard equipment, alongside a core academic curriculum.
UTCs are a natural feeder to manufacturing apprentices; a fifth of year 13 UTC leavers became apprentices in 2025, and they have proved highly effective at producing work-ready young people.
I’d urge any manufacturer to look at the opportunity to join the more than 400 employers who are collaborating with UTCs. Together, these initiatives give hope that the effort to close the manufacturing skills gap is starting to gather momentum.
Find out more about MTC’s Apprentice Services at:
lloydsbank.com/mtc/apprentices
[1] bbc.co.uk/news/articles/c62920440m2o
