How SMEs will benefit from Labour’s £1 billion employment drive

A scheme that aims to tackle youth unemployment could also help business owners hoping to bring on apprentices, as it promises a rehaul of the current system. 

There have been grumbles that businesses hoping to take on apprentices are often put off by the volume of red tape; but the Government is hoping to reignite interest with grants and by increasing the age boundaries for young people to get involved. 

What is the “New Deal” and how will SMEs benefit?

Announced by Work and Pensions Secretary Pat McFadden, the deal is a drive to get more young people into the workforce, as there has been a 37% increase in the number of people neither learning nor working between 2021 and 2024. Totals now sit around one million. 

The scheme centres upon a £1 billion investment in grants that are hoped will see 200,000 paid jobs made available to those aged between 18 and 24 years old. Previous apprenticeship schemes had a cut-off of 21 years old, so this widens the impact. 

The money will finance a Youth Jobs Grant, which is where SME owners could benefit. Each business will receive a £3,000 grant “for every young person they hire aged 18-24 who has been on Universal Credit and looking for work for six months”, and a £2,000 apprenticeship incentive for every 16-24 year old hired.

The Government is predicting that the scheme could help get 60,000 young people back into the workplace over three years. 

Apprenticeships overhaul and extra cash for hopsitality hires

This latest move comes after a series of announcements over the past few years, which show that the Government is intent on changing a system it acknowledges isn’t working. Prime Minister Sir Keir Starmer has called them “the biggest reforms to apprenticeships in a decade.”

Apprenticeship starts amongst young people have been down 40% in the last ten years, and this, alongside rising unemployment, is the core motivation behind the action. 

In the Autumn budget, the government announced a £725m package of reforms to the Growth and Skills levy, aimed at creating 50,000 new apprenticeships. 

The announcement included some information on a new hospitality apprenticeship scheme, designed to reinvigorate a sector that has struggled with hiring for a long while. New foundation apprenticeships for the retail sector were also teased in the announcement. 

More recently, in February 2026, the Government announced “fast track” apprenticeships reforms. Key changes included updates to training and development for new short courses, as well as cutting approval time from 18 months to as little as three months.

While the new Youth Jobs Grant discussed earlier has grabbed all the headlines, the latest announcement also revealed specifics about the incentives for the new hospitality and retail apprenticeship schemes. 

Similar to the broader apprenticeship incentive, which covers hiring 16-24 year olds for any small business, £2,000 will be awarded to a small hospitality or retail business for every employee hired between the ages of 16 and 21 years old, according to the government’s press release.

Alongside this support for hospitality and retail – and the defunding of some schemes the government says aren’t delivering – it’s now focusing on foundation schemes and the seven new apprenticeship units. Sir Keir Starmer says these units are “aligned to Industrial Strategy priorities including artificial intelligence, engineering, clean energy and construction”. More, he adds, are incoming. 

Are apprenticeships affordable for SMEs?

Simply put, the grants scheme will make taking on apprentices more realistic for a huge range of small and medium-sized businesses, who may have been put off previously by the administrative costs and time investment in the current economic climate. In theory, SMEs can use the extra cash to cover the cost of onboarding and training. 

Tina McKenzie MBE, Policy Chair of the Federation of Small Businesses, calls the new initiative “a game-changer” and says the opportunities will be crucial for “individuals themselves, for small businesses and for local economies and people.”

She added that the changes will help small firms hire.“It’s the right choice to prioritise public funding to back small employers in particular to provide apprenticeships for young people.” 

Polly Dhaliwal, Chief Operating Officer of Enterprise Nation, agrees. “Small businesses are where most young people get their first real experience of work, and our community of more than 170,000 small businesses wants to hire young talent but needs the risk taken out of it.”

“That’s exactly what these measures do”, she continues. “The £3,000 Youth Jobs Grant and the £2,000 apprenticeship incentive for smaller employers are practical, meaningful support that will make a real difference to whether a small business takes a chance on a young person”

If you’re a business owner and you think hiring an apprentice might become a viable option with one of these grants and/or incentives, it is worth exploring further what grants and incentives are actually available to your sector. 

For the businesses that get it right, the potential benefits are huge. As an entrepreneur and author, Sarah Abel, CEO of TNB Skills Training, wrote for us last year: “When I built my first six- and seven-figure businesses using government funding, I made sure my team was trained in-house, leveraging funding streams that already existed. It worked then, and it works now.”