Dave Atkinson, UK Head of Manufacturing SME & Mid Corporates, Lloyds, considers if 2026 could be the year that the UK finally starts to get to grips with its manufacturing skills gap.

Is the tide turning?

Regular readers will know that I’ve been writing about skills in this column for many years now. The issue is well understood; manufacturers are struggling to attract and retain talent as the sector faces increasing competition from other sectors, and it is acting as a barrier to growth.

However, progress has been slow. According to the latest available data from the Office for National Statistics, there were 50,000 manufacturing vacancies in October 2025 (i). This is at a time when almost a million young people aged 16-24 are out of work, education or training (ii).

A separate earlier study by the Department for Education reported that a third (34%) of unfilled manufacturing roles are classed as skill-shortage vacancies; positions that remain unfilled because of a lack of skills, qualifications or experience among applicants (iii).

And it’s a particular issue when it comes to the kind of digital skills required as manufacturers race to adopt advanced technologies including Artificial Intelligence, automation and manage cyber risks.

Strategic support

In November, we marked a major milestone in our strategic partnership with MTC (Manufacturing Technology Centre), which works to foster skills and innovation in the sector.

It’s a collaboration that provides a unique platform to connect manufacturers with high-quality training in areas like electrification, digitalisation and clean energy systems, and it celebrated its 10-year anniversary in 2025.

During that time, MTC has trained more than 5,000 apprentices, engineers and graduates through its training centres in Coventry, Oxfordshire and Liverpool. And the recent announcement of MTC North Tyneside, opening in 2026, marks an exciting next step in this continued journey. We’ve extended our support to MTC to over £18.5 million and are now aiming to upskill more than 6,500 by the end of 2029.

Lloyds’ support has also helped develop MTC’s Apprentice Support Service Programme, which provides a dedicated service to help SME manufacturers to recruit apprentices and access salary support funding via the government’s Apprenticeship Levy.

MTC is an organisation that is delivering real results for UK manufacturers, so it’s worth exploring how they can support you too.

The evolving apprentice opportunity

Speaking of the Apprenticeship Levy, there was some welcome reform to the scheme in the last budget, which comes into effect from April this year.

It’s a relatively complex scheme, so to recap, the Levy is a tax paid by all employers with an annual wage bill of more than £3 million, who are required to pay 0.5% of their payroll each month. That money is then ringfenced to pay for apprenticeship training.

The employer paying the Levy can either use the cash themselves, or they can transfer up to 50% of the fund to firms in their supply chains that don’t pay the Levy, to upskill existing employees or hire new apprentices.

Before the reforms announced by the Chancellor, the Levy could be held for two years before it expired and the money was reclaimed by the government. That will now be reduced to one year.

At the same time, while non-Levy-paying SME employers previously had to contribute 5% of training costs, with the Levy funding the remaining 95%, that employer contribution will be removed entirely. It means SMEs employing apprentices aged under 25 will now have their training costs completely covered by the government, though they will still have to pay their wages.

This comes on top of the £1,000 Apprenticeship Incentive paid to SMEs for each young apprentice, who will also be exempted from Employers National Insurance contributions for the length of their apprenticeship.

I’m hopeful that the shorter timeline should help focus minds on making the most of the Levy money – after all, if you don’t use it, you lose it.

This has the potential to accelerate the scheme’s uptake and get more employers signing up existing staff members and new recruits for apprenticeships. In turn, that will only help get more people into the industry sooner and fill that skills gap as quickly as possible.

Colleges and collaboration

I also continue to be impressed by the important work being done by University Technical Colleges (UTCs) and the Baker Dearing Educational Trust.

There are now 44 UTCs across the country, educating over 21,000 students, with a new UTC recently announced for Doncaster. UTCs work closely with employers to provide an education focused on delivering the skills that local growth sectors need.

The Baker Dearing Educational Trust, the founder of the UTC model, sits at the heart of the UTC network. Working closely with all stakeholders, it provides a one-stop-shop for employers to engage with UTCs nationally and ensures UTCs keep pace to deliver industry-relevant skills that the economy needs.

There’s a big focus on STEM subjects, particularly engineering, and project-based learning, where students aged mainly 14-19 engage with real-world challenges set by employers using industry standard equipment.

Young people spend anywhere from 40% upwards studying practical, technical subjects alongside a core academic curriculum. Crucially, all aspects of the UTC education is linked to the world of work to ensure students have the knowledge, skills and attributes necessary to thrive in the workplace.

UTCs are a natural feeder to manufacturing apprentices; a fifth of year 13 UTC leavers progressed to apprenticeships in 2025. UTCs are working to create a pipeline of inventors, engineers, scientists, and technicians of tomorrow, and they have proved highly adept at partnering with industry to produce work-ready young people with the skills technical businesses need.

And there’s now an exciting proposal to incorporate UTC-type learning in existing schools, with pupils aged 14 given the option to continue with a conventional academic curriculum or move onto a UTC-style technical pathway instead.

I’d urge any manufacturer facing challenges to look at the opportunity to join the more than 400 employers who are already collaborating with UTCs. Together, these initiatives combine to give hope that the effort to close the manufacturing skills gap is starting to gather real momentum.

I’m hesitant to say that 2026 will be the year that we finally crack this puzzle, but it does seem that talk is being translated into action. Industry and education are working together to inspire and engage young people with the career opportunities that manufacturing can provide, and that has to be a significant step in the right direction.

Find out more about MTC’s Apprentice Services at lloydsbank.com/mtc/apprentices

Lloyds Bank LogoLloyds Bank Logo Lloyds and Lloyds Bank are trading names of Lloyds Bank plc. Registered Office: 25 Gresham Street, London EC2V 7HN. Registered in England and Wales no. 2065. Telephone: 0207 626 1500.

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(i) https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/
employmentandemployeetypes/timeseries/jp9i/unem

(ii) https://www.bbc.co.uk/news/articles/c62920440m2o

(iii) https://explore-education-statistics.service.gov.uk/data-tables/fast-track/1b57b1df-c585-402f-0ec0-08ddad7b3f3e



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