Make UK’s Industrial Strategy Skills Commission Proposes Sweeping Reforms

03 April, 2025

Over the past five months, the Commission has engaged with business leaders, employers, educators, and policymakers to identify practical solutions to the UK’s growing skills deficit. Among its key recommendations is the establishment of a formal ‘Skills Covenant’—a binding commitment between government and industry to increase investment in workforce training and upskilling.

The Commission is calling for the immediate ringfencing of unspent employer contributions to the Growth and Skills Levy, which currently stand at £800 million and are used elsewhere by HM Treasury. Additionally, it demands that the £650 million raised annually from the Immigration Skills Charge be redirected solely to skills investment, as originally intended. Combined, these funds could finance the training of 40,000 new engineers, helping to close the UK’s manufacturing skills gap, which currently costs the economy £6 billion per year.

In exchange for government action, manufacturers are prepared to commit to a range of measures to boost training opportunities, including:

A workforce exchange programme, where businesses second staff to education providers to enhance teaching capacity.

The development of an electronic work skills passport, which would track workers’ qualifications and enhance mobility across sectors.

Strengthened partnerships with schools, using the Careers and Enterprise Company Employer Standards to promote technical education and apprenticeships.

The decline in high-value vocational courses is exacerbating the skills crisis. Many education providers have stopped offering expensive engineering and manufacturing courses due to financial unsustainability. To address this, the Commission recommends increasing funding bands for key courses—such as the Level 3 engineering and technician apprenticeship—from £27,000 to £35,000, reflecting the true cost of course delivery.

Additionally, rules should be amended to allow training providers to use levy funds for capital investments in machinery and equipment, making it easier to establish and sustain courses in capital-intensive subjects like engineering.

Make UK’s research highlights that more than 50% of manufacturers plan to increase spending on upskilling over the next five years. To support this, the Commission advocates for a tax rebate on accredited skills training in key sectors and occupations identified by the Industrial Strategy Skills Council. This would provide a direct financial incentive for businesses to invest in training, ensuring a skilled workforce capable of driving industrial growth.

The Commission also underscores the urgent need to overhaul careers guidance in schools and colleges. It calls for an expansion of the University Technical College (UTC) model to provide young people with more technical training opportunities, ensuring a steady pipeline of skilled workers for the manufacturing sector.