Productivity Growth & Skills: What the Autumn Budget 2025 Means for L&D Professionals 

When Rachel Reeves delivered the 2025 Autumn Budget on 26 November, one theme cut through the fiscal detail: the UK cannot fix its weak productivity performance without a step-change in skills. As the Chancellor put it, this is a Budget designed to “grow our economy through stability, investment and reform” – time will tell if this is successfully achieved.

The Office for Budget Responsibility (OBR) however reinforced that urgency. Its latest forecast downgraded the UK’s medium-term productivity growth from 1.3% to 1.0%, warning that productivity is central to the country’s “sustainable growth rate” and that the outlook remains “inherently uncertain.”

Against this backdrop, the Budget unveiled the biggest overhaul of skills funding in a decade, including the Growth and Skills Levy (replacing the Apprenticeship Levy from 2026) and a £1.5bn skills package focusing on digital, technical and modular learning.

Yet experts were quick to warn that policy announcements alone won’t shift the dial. Peter Cheese, chief executive of the Chartered Institute of Personnel and Development, argued the government still “has not done enough to articulate how to encourage growth and invest in skills,” highlighting the persistent gap between employer need and the UK’s training infrastructure.

Despite the criticism, for learning and development (L&D) professionals, this Budget could represent a sea change. The new policy settings – especially the forthcoming Growth and Skills Levy – offer both a strong rationale and new funding pathways for employer-led training.

This article explores the key Budget and OBR developments, why they matter for L&D, and what learning and development professionals need to know.

The productivity and skills challenge and why it matters

Skills as the engine of productivity

Skills determine how effectively people and organisations turn resources into output. As the House of Commons Library puts it, “productivity … is directly linked to living standards, with a country’s ability to improve its standard of living over time almost entirely dependent on productivity growth.” Skilled workers adopt technology faster, produce higher-quality outputs and enable firms to enter higher-value markets. Regions with strong skills ecosystems also attract investment; those without them fall behind.

A decade of weak productivity

The UK’s productivity stagnation is not new. Since 2008, productivity growth has been “much weaker”, which the Commons Library notes is “a structural issue, not a temporary blip.” Weak productivity depresses wage growth, limits fiscal room for public services, and makes it harder for businesses to compete internationally. Reeves’ Budget directly acknowledged this, with the Chancellor stating: “In the face of challenges on our productivity, I will grow our economy through stability, investment and reform.”

What the 2025 OBR forecast tells us

The (OBR), which maps out how the economy is set to perform based on the government’s tax and spending policies, increased its growth expectations for this year, but downgraded its forecast for the following four. The OBR’s November 2025 forecast makes the challenge clearer. It cut its estimate of medium-term trend productivity growth from 1.3% to 1.0%, aligning more closely with other forecasters. It said, lower productivity growth – a measure of output of the economy per hour worked – was behind the weaker growth forecast. The OBR also emphasises that productivity forecasting is “inherently difficult” and subject to “significant uncertainty”, reflecting technological disruption, global pressures and long-run weaknesses in the UK’s skills base.

A widening skills gap

These productivity problems are reinforced by systemic skills shortages. The CIPD highlights persistent issues including low basic skills, weak vocational pathways and chronically low employer investment in training. The Department for Education’s Employer Skills Survey shows shortages rising across sectors and regions. These shortages now threaten major national goals:

• The House of Lords Science and Technology Committee warns that a lack of STEM skills risks undermining ambitions to become a “science and technology superpower” by 2030.
• Nesta estimates the UK needs to expand its heat-pump engineer workforce from 3,000 to 27,000 by 2028 to meet net-zero commitments.
• The Social Market Foundation projects a 25,000 shortfall in EV technicians by 2030.

As Louise Newbury-Smith, Head of Zoom UK, puts it: “The UK’s productivity ambitions hinge on widespread digital upskilling. Continued investment in digital skills, modern infrastructure and innovation-friendly policies will be essential.”

The Growth and Skills Levy: what L&D teams need to know

Replacing the Apprenticeship Levy from 2026, the Growth and Skills Levy (GSL) marks a fundamental shift in how the UK funds workforce development.

Flexible funding for real-world learning

For years, L&D teams have had to shoehorn organisational needs into apprenticeship frameworks. The GSL breaks that mould by allowing funding for:

• Short courses
• Modular, stackable training
• Technical and digital skills programmes
• Targeted upskilling aligned to business priorities

This flexibility directly benefits employers seeking faster, applied, just-in-time learning.

A larger, targeted investment

The Budget commits £1.5bn over three years to skills programmes linked to the GSL and the Youth Guarantee. Funding will be increasingly tied to addressing skills shortages in priority sectors such as engineering, construction, healthcare, AI and digital. Even employers outside these sectors will feel the effects, as shortages in high-demand roles place upward pressure on wages and affect labour mobility across the economy.

Support for young workers

The GSL reforms include fully-funded apprenticeships for under-25s – particularly valuable for organisations building early-career pathways or addressing succession planning needs.

A new emphasis on impact and productivity

Training funded through the GSL will need to demonstrate:

• Relevance
• Measurable outcomes
• Alignment to productivity and economic goals

For L&D teams, this will elevate the importance of learning analytics, impact measurement and strategic alignment.

What this means for L&D: five strategic shifts

1. Expect greater pressure to align L&D with organisational productivity goals

The political narrative: skills = productivity = growth, is reflected inside organisation strategy. The CIPD supports this with: “skills are vital to meeting both current and future business demands.” L&D leaders will face greater scrutiny on how learning contributes to:

• Operational performance
• Adoption of digital tools
• Innovation velocity
• Leadership effectiveness
• Retention and talent mobility

This will require better measurement frameworks and stronger collaboration with HR, finance and strategy teams.

2. You will need to pivot toward shorter, modular, and technical training

The Budget heavily emphasises shorter, modular and technical training. Many organisations still depend on traditional multi-day programmes that are costly and slow to update. The future will favour:

• Shorter, micro-learning courses
• Modular qualifications
• Technical and digital skills learning
• Applied skills rather than theoretical content

This aligns neatly with modern L&D best practice-but many organisations still rely heavily on traditional, multi-day, classroom-centric programmes. Now is the time to review your learning catalogue and ask:

• Which programmes can be modularised?
• Where can digital delivery improve reach and consistency?
• Do we have pathways in digital skills, data literacy, AI, leadership and compliance?
• Are we prepared to meet rising demand for technical and AI-related training across the workforce?

3. Digital and AI skills development is becoming non-negotiable

Tech leaders and major employers are calling for urgent digital upskilling to support the UK’s productivity ambitions. Every L&D team should now have an answer to:

• What is our organisation’s baseline digital capability?
• How prepared are our people to work with AI tools?
• What digital skills gaps threaten our competitiveness?
• How will we train non-technical employees in AI literacy and safe usage?

The Budget strengthens the mandate for digital capability, and L&D must lead that transformation.

4. Leadership capability becomes mission-critical

Productivity isn’t just about technical skills. It requires:

• Effective managers
• High-performing teams
• Strong communication
• A culture of accountability and innovation

With the Levy supporting broader training formats, organisations now have more tools to bring leadership and management development to the forefront.

5. Talent mobility and internal progression will become key productivity drivers

With labour shortages persisting across sectors, the Budget aims to create new pathways for young people and skilled workers. For organisations, that means:

• Upskilling existing employees becomes cheaper than recruiting
• Career pathways and internal mobility matter more
• L&D must support reskilling, not just upskilling
• Skills frameworks need to be aligned to internal mobility opportunities

Productivity grows when people are in roles where they can perform at their best-L&D plays a crucial role in enabling those transitions.

Practical steps and checklist for L&D professionals

If I were advising a corporate L&D team today, here’s what I’d recommend you start doing – even before full GSL guidance arrives:

1. Audit current skills and learning needs. – Map where your organisation has chronic or emerging skills gaps (digital, AI, compliance, leadership, technical skills). – Identify roles where targeted upskilling or reskilling could drive the largest productivity gains.
2. Design modular, flexible learning pathways. – Structure learning into shorter “units” or micro-modules rather than full-blown courses/apprenticeships – giving you agility when GSL funding becomes available. – Combine formats: online (e-learning), hybrid, in-person – depending on role, need, and learning style.
3. Tie L&D to business KPIs and productivity metrics. – Work out metrics to show ROI: improved performance, efficiency, staff retention, reduced errors/risks, innovation output, time saved. – Build a business case for training investment – now easier given the Budget’s emphasis on skills as economic infrastructure.
4. Stay up to date – monitor government guidance and funding windows. – The GSL details are not yet final; when announced, act quickly to align your training plans to funding/eligibility. – Engage with any relevant announcements from Skills England (or other agencies) and ensure you’re ready to apply.
5. Communicate internally: make L&D everybody’s business. – Share with senior leadership that this is not just an HR or training initiative – it’s a strategic lever for growth, resilience, and competitiveness. – Encourage managers to see upskilling/reskilling as part of operational planning, not a peripheral activity.

Risks and uncertainties to watch

While the 2025 Autumn Budget is ambitious, several risks remain:

• Productivity forecasts remain “inherently uncertain”, according to the OBR.
• GSL success depends on employer uptake and high-quality provision.
• Funding rules are not yet finalised, creating planning risks.
• Economic pressures may cause organisations to reduce training budgets despite new incentives.

L&D leaders must plan carefully and build agility into their strategies.

Why this matters: a strategic perspective

This is a pivotal moment for L&D professionals. If you act now – auditing skills, designing modular programmes, linking learning to business outcomes – you can position your organisation to benefit from GSL funding, close skills gaps, boost productivity, and build long-term resilience.

How InfoAware can help

We’re here to help you take full advantage of this opportunity. Whether it’s creating flexible and impactful digital learning at short notice, or upskilling your current workforce in compliance, technical subjects, business skills, or leadership and management – we deliver training that delivers measurable results, fast. As soon as the new Levy (GSL) is announced, we will be ready to support you through:

• Tailored learning solutions aligned with Growth and Skills Levy funding
• Expert learning consultancy to support you every step of the way
• Flexible training formats to suit your workforce and learning styles
• Off-the-shelf and bespoke e-learning courses across a wide range of topics: digital, compliance, leadership, technical, and more

Get in touch

Get in touch to explore how we can help you turn the 2025 Autumn Budget’s skills agenda into measurable organisational impact. You can contact us via our contact form, or email us at info@infoaware.com.