How US Tariffs Impact UK Training Budgets – And Why Apprenticeships Are Still a Smart Solution

The recent US tariffs, announced on 2nd April 2025, have introduced a 10% levy on nearly all UK exports to the US, with a higher 25% tariff on cars, steel, and aluminium. As businesses across the UK navigate this new economic landscape, many are feeling the pressure on their budgets—including those allocated for employee training. At Professional Academy, we understand the challenges this poses, but we also believe apprenticeships remain a cost-effective way to train your team. Here’s how US tariffs might affect UK training budgets and why apprenticeships can help.

How US Tariffs Affect UK Businesses and Training Budgets

The US tariffs, effective from 5th April 2025, are already impacting UK industries that rely heavily on exports, such as automotive and pharmaceuticals. For example, the Institute for Public Policy Research estimates that over 25,000 jobs in the UK car manufacturing sector could be at risk due to the 25% tariff on cars. Companies like Jaguar Land Rover and pharmaceutical giants like AstraZeneca, which derive 40% of their sales from the US, may face increased costs as raw materials and goods cross borders multiple times.

These financial pressures can lead to tighter budgets across all business functions, including learning and development (L&D). A recent report highlighted that UK training budgets have already seen a decline, with spending per employee dropping from £954 in 2023 to £774 in 2024. The added strain of US tariffs could exacerbate this trend, as businesses may redirect funds to cover rising import/export costs or offset potential revenue losses. For instance, if the UK retaliates with its own tariffs on US goods (as the government is considering, with a consultation deadline of 1st May 2025), UK consumers could face higher prices, further squeezing company budgets.

Additionally, economic uncertainty caused by tariffs may lead to higher inflation and interest rates, as noted by the Bank of England. This could force businesses to cut discretionary spending, such as training, to manage costs. Smaller companies, which spent an average of £374,207 on training in 2024 (down from £459,177 in 2023), may be particularly affected, as they often lack the financial buffer of larger firms.

Why Apprenticeships Remain a Smart Solution

Despite these challenges, apprenticeships offer a practical and cost-effective way for UK companies to continue investing in employee training. Here’s why:

• Funded by the Apprenticeship Levy: The apprenticeship levy, a tax on UK employers, funds training provisions like apprenticeships. In England, the majority of this revenue subsidises apprenticeship costs, meaning businesses can train employees without dipping into their core budgets. Even non-levy-paying employers can access funding from the central Apprenticeship Budget, which is partly supported by unused levy funds. In 2021–22, the levy raised £550 million more than was allocated, showing there’s ample funding available for training.
• Cost-Effective Training with Productivity Gains: Apprenticeships provide on-the-job training, reducing the need for expensive external courses. A study by St Martin’s Group found that UK employers gain between £2,500 and £18,000 per apprentice annually during their training, as apprentice outputs often exceed costs. To offset the tariff increases, UK businesses might first consider cutting costs, but a smarter approach is boosting productivity. The ONS reports UK productivity is 13% below the G7 average, with growth dropping from second highest in the G7 (1997–2007) to second lowest (2009–2019) after training budgets were slashed post-2008/9 recession. Research by KPMG shows 86% of high-performing organisations use learning to improve productivity, enhancing employee satisfaction, confidence, and long-term success.
• Skills Development Without Budget Cuts: With 92% of companies reporting that apprenticeships lead to a more motivated workforce, and 86% noting relevant skill development, apprenticeships ensure your team gains practical skills without straining your budget. This is crucial in a time of economic uncertainty, as businesses can upskill existing staff or hire new talent without significant upfront costs, all while optimising their approach to productivity.
• Support for Career Growth: At Professional Academy, we’ve seen how apprenticeships can transform careers. Our recent Advice Shop session on 28th March 2025 highlighted how apprenticeships support career advancement, with insights from industry experts and former learners. Apprenticeships offer a structured path for employees to grow, which can improve retention—80% of companies report higher employee retention after implementing apprenticeships.

Take Action: Invest in Apprenticeships Today

US tariffs may create financial challenges for UK businesses, but they don’t have to halt your training efforts. Apprenticeships provide a funded, practical way to develop your team’s skills, ensuring your business remains competitive even in uncertain times. At Professional Academy, we offer a range of apprenticeship programmes to support your workforce, from new hires to existing employees looking to upskill.

Ready to explore how apprenticeships can benefit your business? Book a call with our qualifications adviser to discuss your options, or contact us at enquiries@professionalacademy.com or 01223 365 505.