Summary
The Institute of the Motor Industry (IMI) warns that the UK government’s headline promise of “free” apprenticeships for SMEs will be outweighed by rising wage and payroll tax costs, leaving many car dealers and garages with higher overall bills and risking further declines in technician apprenticeship recruitment.
What changed
- Removal of the 5% co-investment fee for SMEs training apprentices under 25 (estimated saving: £650–£800 per apprentice).
- Apprentice minimum wage rising from £7.55 to £8 per hour.
- Higher employer National Insurance (NI) contributions.
IMI’s costed examples for SMEs
- Level 2 Autocare Technician:
- Training saving: £650
- Added wage cost: £819
- Added employer NI: £122.85
- Net change: +£291.85 (higher overall cost)
- Level 3 Light Vehicle Technician:
- Training saving: £800
- Added wage cost: £819
- Added employer NI: £122.85
- Net change: +£141.85 (higher overall cost)
Why this matters
- IMI says “free training” does not reduce total employment costs when wage floors and NI rise.
- Smaller dealers and garages (around 96,000 SMEs) operate on tight margins and may cut or defer apprentice hiring.
- Apprenticeship starts in automotive have fallen about 30% since 2018/19, with an average loss of 500+ per year, worsening technician shortages.
Additional barriers
- System complexity and admin burden deter SMEs without dedicated HR support.
- Uncertainty about net costs during training undermines confidence to recruit.
What the IMI is calling for
- Reduce the overall cost of employing apprentices (wages and on‑costs), not just training fees.
- Simplify the apprenticeship system to improve SME participation.
Bottom line
Despite fee waivers for under‑25 apprentices, higher wage and NI costs mean SMEs still face a net cost increase per apprentice. IMI argues that without measures targeting wage affordability and administrative simplification, apprenticeship starts are unlikely to recover.
