Skills & Training: A Resilient Market at the Heart of the UK Skills Agenda

The UK’s productivity performance has been a defining weakness in the national economy for over a decade. Output per hour worked is currently around 18% below that of the United States, and the UK continues to lag most of its G7 peers on this measure. Against this backdrop, the growing number of young people not in education, employment or training (NEET) has become a pressing national concern, placing the NEET challenge at the top of the UK political agenda.

Why is investment falling at the moment demand is rising?

Skills investment is widely recognised as a central part of the solution, yet employer investment in training has moved the other way. Spending per employee has fallen by approximately 29% in real terms since 2011, less than half the EU average, and total UK employer training expenditure fell by £6 billion between 2022 and 2024 alone, to its lowest recorded level.

This is happening as training demand becomes more urgent, not less. Regulatory and compliance obligations continue to expand across construction, care, fire safety and food hygiene, while employers consistently cite skills shortages as a constraint on growth. The widening gap between need and investment creates structural opportunity for well-positioned providers and their investment partners.

Government has identified this as a policy priority: the establishment of Skills England, the phased introduction of the Growth and Skills Levy, and ongoing apprenticeship funding reform all point to sustained state attention, alongside a fresh SME plan pledging further annual investment by 2028–29.

When training is mandatory, demand becomes far more resilient.

A significant proportion of training delivered in the UK is not discretionary. Mandatory demand is underpinned by:

• Health and safety obligations
• Fire safety and food hygiene requirements
• Care standards
• Construction competency frameworks, including CSCS and CITB
• Recurring one, three and five-year recertification cycles

These obligations require employers to train, and to keep training, to remain compliant and insurable – demand that is largely insulated from the wider decline in discretionary training spend.

Who will fill the growing skills gap as workers retire and NEET numbers climb?

Two demographic pressures are converging:

An ageing workforce across technical trades is creating succession and retraining needs as experienced workers retire, and the number of 16 to 24-year-olds classified as NEET has passed one million, with the rate rising to around 13.5% in early 2026. Government’s response, including the Youth Guarantee, foundation apprenticeships and the Youth Jobs Grant, is designed to channel this cohort back through the training system

As higher education comes under scrutiny, where will learners and employers turn?

Higher education providers face pressures of their own: the Office for Students expects that 42.7% of higher education providers in England could be in deficit in 2025–26, while emphasis is shifting towards course relevance and employability over volume.

The Government’s Post-16 Education and Skills White Paper, built around the same NEET figure, points policy in the same direction – signalling opportunity for founder-led, technical education providers working alongside traditional universities.

Will government reforms create new opportunities or simply redraw the market?

In April 2026, the Apprenticeship Levy was replaced by the Growth and Skills Levy, broadening levy use to shorter, modular “apprenticeship units”. The changes have redistributed funding rather than simply expanding it: Level 7 (master’s-level) apprenticeship funding was withdrawn for learners aged 22 and over from January 2026, with further leadership and management standards defunded from September 2026 – a reminder that reform creates winners and losers as much as a blanket tailwind. Providers able to diversify beyond a single funding-dependent niche are best placed to manage the transition.

Market structure and consolidation

The sector’s structure lends itself well to platform-building: providers are often specialist, regional and founder-led, with strong client relationships but limited scale infrastructure. Defensible positions built on accreditation and Ofsted track records create scope for a platform that adds capability while protecting delivery quality and founder autonomy.

Why this makes skills and training attractive to private equity

For private equity investors, skills and training offers a rare combination of resilient demand, visible revenue and practical value creation levers:

• Recurring demand driven by compliance, accreditation and recertification cycles.
• Revenue visibility from contracts, public funding and regulation-linked training requirements.
• Barriers to entry created by accreditation, inspection history, awarding body status and employer trust.
• Scalable value creation through stronger sales processes, broader delivery channels and selective M&A.

Our experience in skills and training investments

Fuel Learning. In 2023, we invested in Fuel Learning, a Midlands-based leadership and management training specialist, taking a significant minority stake alongside CEO Ian Prentice and the founding management team. Fuel delivers bespoke leadership, management and apprenticeship programmes for clients including Network Rail, OCS and GXO. Since investment, the business has doubled headcount and achieved an Ofsted “Outstanding” rating in June 2025, with inspectors highlighting the exceptional quality of provision. Fuel remains a current portfolio company and reflects our approach to backing founders who want to retain meaningful ownership while accessing the capital and support needed to scale.

Sparta Global In 2017, we invested in Sparta Global, a London-based technology training and services provider, investing a minority stake alongside founders David Rai and Tim Staton. Our investment supported the company’s transition from an early-stage training academy into a full technology services provider, including senior leadership expansion and new facilities in London and Birmingham. Sparta grew relationships with clients including Bupa, Channel 4, Deloitte and the Home Office, quadrupled EBITDA and doubled headcount. In 2020, we exited via a secondary buyout to Inflexion Private Equity, delivering a 7x return to our investors and enabling the founders to continue scaling the business with new backers.

Skills and training is becoming essential infrastructure for the modern economy

Skills and training is no longer a discretionary people-development sector; it is becoming core economic infrastructure. Productivity pressure, compliance requirements and targeted government funding are converging to create a market with durable demand, real barriers to entry and room to build at scale.

For founders, that creates a timely opportunity. Businesses with strong delivery quality, accreditation and customer trust are well placed to scale, but many will need capital, infrastructure and partnership to do so. That is where our model is most relevant: backing ambitious management teams through growth, succession or partial realisation, while preserving the specialist strengths that made the business valuable in the first place.

If you’re exploring the next phase, we’d welcome a conversation.

By Ellie Nicholls www.keycapitalpartners.co.uk/our-team/

 

 

Sources:
Office for National Statistics (ONS) (productivity and NEET statistics)
House of Commons Library (productivity and GDP international comparisons; NEET and youth unemployment briefings; skills policy in England)
Institute for Fiscal Studies (IFS) (investment in training and skills)
Learning and Work Institute (Falling Short: Understanding Further Falls in Employer Training)
Department for Education (DfE) (Employer Skills Survey 2024; NEET estimates; graduate employment statistics; post-16 education and skills policy proposals)
Office for Students (OfS) (analysis of higher education provider deficits and liquidity) GOV.UK (Growth and Skills Levy guidance); Explore Education Statistics (DfE statistical releases and datasets).