Enginuity and CEA Partnership Targets the £5.2 Billion Cost of Engineering Skills Gaps

Enginuity and CEA Partnership Targets the £5.2 Billion Cost of Engineering Skills Gaps

Trade association partnerships rarely move markets, but the memorandum of understanding signed between Enginuity and the Construction Equipment Association arrives at a moment when England’s entire skills funding architecture is being dismantled and rebuilt. From April 2026 the Apprenticeship Levy became the Growth and Skills Levy, funding rules were rewritten, sixteen apprenticeship standards were marked for defunding, and Skills England began deciding which occupations and which short modular courses will attract public money.

In a system that allocates funding according to classification and evidence, sectors that cannot produce reliable data about their own workforce tend to lose out quietly rather than loudly, and that is the commercial logic behind the agreement.

The CEA has committed to feeding sector-specific intelligence into Enginuity’s Policy Centre for Supply Chains and SMEs, the independent body launched in late 2025 to give engineering and manufacturing smaller firms a route into national policymaking. In exchange, CEA members gain access to research, policy briefings and workforce intelligence generated through the Policy Centre. The deal is less about goodwill between two organisations and more about converting the operational experience of machinery manufacturers, component suppliers and dealer networks into the kind of statistical evidence that funding decisions are actually built on.

Briefing

• Enginuity and the CEA have formalised their relationship through a memorandum of understanding centred on Enginuity’s Policy Centre for Supply Chains and SMEs, covering joint research, policy advocacy, workforce development and government engagement.
• The agreement lands as England transitions from the Apprenticeship Levy to the Growth and Skills Levy, with levy funds now expiring after twelve months rather than twenty-four, levy-payer co-investment rising to 25 per cent, and full government funding introduced for apprentices under 25 at smaller employers.
• Enginuity’s Mind the Gap research, delivered with SQW, estimates that skills shortages and skills gaps cost UK engineering and manufacturing around £5.2 billion each year, with affected individual businesses losing as much as 10 per cent of their gross value added, roughly £110,000 annually.
• The UK construction equipment sector generated revenue of more than £15 billion in 2021/22, employs over 44,000 people, invests around £250 million a year in research and development, and ranks fifth globally and first in Europe by unit sales.
• Construction equipment manufacturing was not named explicitly among the frontier industries of the government’s Advanced Manufacturing Sector Plan, leaving the CEA to argue for inclusion in delivery mechanisms including Advanced Manufacturing Clusters and sector-specific skills funding.

The £5.2 Billion Productivity Leak Running Through the Supply Chain

The financial case for the partnership was quantified only weeks before it was signed. Enginuity’s Mind the Gap report, published in June 2026 and delivered by SQW in collaboration with Oxford Innovation Advice and Qa Research, put a number on something the industry has long described anecdotally. Skills shortages and skills gaps are costing UK engineering and manufacturing businesses an estimated £5.2 billion annually, equivalent to around 2 per cent of the sector’s total output. At company level the effect is sharper still, with affected firms potentially losing up to a tenth of their gross value added, a figure the research placed at roughly £110,000 per business per year.

The distribution of that cost is what should interest anyone running a machinery business or supplying into one. Around half of engineering and manufacturing SMEs surveyed reported experiencing skills gaps or shortages, with 36 per cent citing gaps in the capability of existing staff and 35 per cent reporting difficulty filling roles at all.

Where gaps exist, employers estimate that roughly one in five of their workforce is affected, while firms facing shortages typically carry two or three vacancies they cannot close. Technical manual skills remained the single most sought-after capability, cited by 74 per cent of respondents, which places the pressure squarely on assembly, fabrication, hydraulics, welding and field service rather than on office functions.

Enginuity framed the same figure as an opportunity rather than a loss, calculating that £5.2 billion would be sufficient to support more than 300,000 apprenticeships each year at typical sector starting salaries. Chief executive Ann Watson has said the findings point to a productivity challenge and a clear commercial opportunity in equal measure, and the charity has been explicit that the recommendations will be taken directly to government through the Policy Centre. For construction equipment manufacturers, that reframing matters because it moves the skills conversation out of the territory of corporate social responsibility and into the territory of margin, throughput and delivery reliability.

A Funding System Being Rewritten Mid-Cycle

The transition to the Growth and Skills Levy represents the largest change to English apprenticeship funding in a decade, and it cuts in more than one direction for the construction equipment supply chain. Levy-paying employers, which in this sector means the larger original equipment manufacturers and major dealer groups, now see their funds expire after twelve months instead of twenty-four, have lost the 10 per cent top-up, and face co-investment of 25 per cent once their pot is exhausted. Funding for Level 7 apprenticeships was restricted from January 2026 to new starters aged 16 to 21, closing a route that some businesses had used to develop senior engineering and management capability.

Smaller suppliers, by contrast, have been handed the strongest incentives they have ever had. Government now covers the full cost of apprenticeship training for apprentices under 25 at non-levy-paying employers, removing the previous 5 per cent contribution, and a cash incentive of £2,000 per apprentice aged 16 to 24 has been introduced. Foundation apprenticeships at Level 2 launched across engineering, manufacturing and construction, aimed at younger entrants who need a shorter route into the workforce. Employers can also now direct levy funding towards apprenticeship units, short modular courses built from existing standards, with the first wave prioritising digital, artificial intelligence and engineering.

The practical difficulty is that these flexibilities only deliver value if the courses on offer match the work that construction equipment businesses actually do. Apprenticeship units are being designed around employer-defined standards, and the sectors that supply detailed occupational evidence early will find their requirements reflected in what gets funded.

That is precisely the mechanism the CEA is now buying into, and it explains why Viki Bell, the association’s chief executive, described the arrangement in terms of routes and access rather than aspiration, noting that “Formalising our relationship with Enginuity gives us a stronger route to make sure the views of construction equipment employers are heard where it matters. Our members have first-hand knowledge of the skills gaps affecting the sector, and this partnership gives us a practical way to feed that insight into policy, research and future skills planning.”

The Classification Problem Facing Britain’s Machinery Makers

The construction equipment industry has an awkward relationship with the categories that policy uses. It is manufacturing, but its output serves construction. Its workforce combines mechanical, hydraulic, electrical and increasingly software competencies that sit across several occupational families. When the government published its modern industrial strategy in 2025 alongside an Advanced Manufacturing Sector Plan built around some 760,000 jobs and more than £82 billion in gross value added, the frontier sub-sectors identified for priority attention included batteries, aerospace, space, advanced materials and agri-tech. Construction equipment manufacturing was not named.

The CEA’s response at the time was measured and constructive, welcoming the long-term direction, the commitment to new technical colleges, the support for modular and hybrid training models and the promise of relief on industrial electricity costs through the British Industry Supercharger and the British Industrial Competitiveness Scheme.

The association also made clear that it would continue pressing for construction equipment hubs to be considered as Advanced Manufacturing Clusters are selected, and for greater flexibility and sector-specific funding within the levy system. Being unnamed in a strategy document is not fatal, but it does mean the sector must argue its way into delivery rather than being carried there automatically.

That is a solvable problem, and the numbers give the industry a strong hand. A sector generating more than £15 billion in revenue, lifting employment by 10 per cent to beyond 44,000, sustaining around £250 million of annual research and development spending and ranking first in Europe by unit sales has a legitimate claim on advanced manufacturing support. What it has lacked is a consistent, independently verified evidence stream connecting those headline figures to specific occupational shortages. The partnership with Enginuity is an attempt to build exactly that stream.

Evidence Has Become the Currency of Skills Policy

Enginuity’s credibility in this space rests on its track record as the former sector skills council for engineering and manufacturing and on the data machinery it has assembled since. Its SME Snapshot survey has grown from 135 participating businesses in July 2025 to more than 250 in the March 2026 edition, collectively representing over 10,000 employees and £1.91 billion in revenue. That evidence base secured Enginuity a meeting with the Minister for Skills and has been used in engagement with the Department for Business and Trade, Skills England and the Department for Education. A third survey ran through the summer of 2026 with CEA members actively encouraged to participate.

The picture the Snapshot paints is one of a sector with capacity to grow that is being held back by inputs rather than demand. Around 76 per cent of respondents reported operating below full capacity, only 17 per cent considered the UK an attractive place to invest and do business, and 52 per cent described the labour market as difficult. Of the 60 per cent that attempted to recruit in the preceding six months, 80 per cent struggled to find suitable candidates. Key findings were previewed at the CEA Members’ Forum in March 2026 before publication, and the association reported that they closely matched what members in the room were experiencing.

Ann Watson, chief executive of Enginuity, cast the arrangement as a means of reaching a specific and commercially significant part of the industrial base, stating that “Working with the CEA gives Enginuity direct access to valuable employer insight from an important part of the UK engineering and manufacturing supply chain. SMEs are central to the sector’s strength, and this partnership will help ensure their needs are better understood and reflected in future skills policy and support.” With more than 325,000 engineering and manufacturing SMEs across the UK, the Policy Centre needs sectoral partners capable of delivering structured, comparable intelligence rather than scattered individual responses.

What Changes for Employers on the Shop Floor

The immediate deliverables for CEA members are informational rather than financial. Members gain access to research, policy briefings and workforce intelligence produced through the Policy Centre, alongside invitations into consultations, pilot programmes, workshops and Enginuity-led skills initiatives. For a mid-sized attachment manufacturer or a regional dealer with fifty staff and no human resources function, the value lies in knowing which funding routes remain open, which standards have been defunded, and how to structure a training plan that survives contact with the new rules.

This layers onto a support stack the CEA has already assembled. The association operates as a Make UK affiliate partner, works with Primary Engineer on early-stage engagement, supports T Level industrial placements, maintains relationships with the IMechE and Cranfield School of Management, and connects members to the National Manufacturing Skills Task Force. The Enginuity agreement adds the piece that was missing, which is a formal channel into national policy formation backed by independent research rather than association advocacy alone.

Bell has been consistent that the exercise must produce practical outcomes rather than position papers, framing the objective around accuracy of understanding: “This is about making sure support for engineering and manufacturing SMEs is based on real employer need, not assumptions. By working with Enginuity, we can help connect our members with useful programmes, research and policy work that supports the long-term strength of the supply chain.”

The test over the next eighteen months will be whether construction equipment occupations appear in the apprenticeship units that Skills England chooses to fund, and whether the sector features in cluster and technical college decisions as they are finalised.

The Service Engineer Is Becoming a Different Job

The technical case for intervention is at least as strong as the financial one. Machines leaving UK factories now arrive with telematics as standard, increasingly sophisticated electronic control systems, emissions aftertreatment requiring diagnostic competence, and in a growing number of product lines high-voltage battery-electric drivelines. Semi-autonomous functions on excavators and dozers, machine control integration, and remote diagnostics delivered through dealer networks have changed what a field service engineer is expected to know. Mind the Gap identified precisely this pattern, recording sustained shortages in core technical and manual skills alongside expanding gaps in digital, data and managerial capability.

The commercial consequence shows up in uptime and residual value rather than in recruitment statistics. Fleet owners and plant hire businesses buy machines on the expectation of supported availability, and that expectation depends on a dealer network capable of diagnosing and repairing increasingly complex systems within acceptable response times.

Where technician capability lags product complexity, the cost surfaces as extended downtime on site, warranty exposure for the manufacturer, and eventually as a discount on used values. Enginuity’s own occupational analysis has noted that vacancies across engineering and manufacturing peaked in 2023 before declining steeply, which suggests that the constraint is now less about the volume of advertised roles and more about the depth of competence available to fill them.

Modular training is the obvious response, and the timing is favourable. Apprenticeship units allow an employer to upskill an existing technician in a specific competency without committing to a full multi-year programme, which suits a workforce that is experienced but needs targeted capability in electrification, diagnostics or data handling. Whether those units cover off-highway machinery in any meaningful depth depends on the occupational evidence submitted while the first wave is being designed.

Where This Lands for Procurement, Fleets and Investment

For infrastructure clients and contractors, the relevance is indirect but real. Equipment availability, aftermarket responsiveness and the pace at which electrified and digitally enabled machines can be supported in the field all depend on the technical depth of the supply chain behind them. A sector losing an estimated 2 per cent of output to skills constraints is a sector with less capacity to absorb demand surges when infrastructure programmes accelerate, and CITB’s Construction Workforce Outlook for 2026 to 2030 already points to a requirement for around 41,200 additional construction workers annually. Machinery supply and machinery support form part of that same delivery equation.

The investment reading is more encouraging than the raw figures suggest. Capability constraints of this kind tend to concentrate value in businesses that solve them, which in practice means dealer groups with strong technical training infrastructure, manufacturers that have internalised electrification competence, and specialist service providers able to support mixed fleets across multiple brands. The current funding settlement, with full government coverage of training costs for younger apprentices at smaller employers and cash incentives on top, materially lowers the cost of building that capability for exactly the SMEs that have historically found it hardest to justify.

The broader significance of the Enginuity agreement is that it treats workforce data as strategic infrastructure rather than administrative overhead. The CEA will host the CECE Congress in London in October 2026, placing the UK association at the centre of the European conversation on skills and the future workforce at the same time as it builds its domestic evidence base. Sectors that arrive at those discussions with quantified, verifiable intelligence about their own labour market tend to shape the outcome. Those that arrive with assertions tend to receive whatever the classification system happens to allocate them.

Key Industry Questions

1. What is the Policy Centre for Supply Chains and SMEs? Launched in late 2025 and powered by Enginuity, the former sector skills council for engineering and manufacturing, the Policy Centre positions itself as an independent arbiter between industry, trade bodies, policy organisations and government. Its function is to gather structured evidence from smaller engineering and manufacturing businesses, translate that evidence into policy recommendations, and provide a route for SMEs into consultations and government engagement they would rarely access individually. It runs the SME Snapshot survey programme, publishes monthly skills policy updates, and commissioned the Mind the Gap research quantifying the cost of skills gaps. The centre argues that more than 325,000 engineering and manufacturing SMEs have historically been underrepresented in national skills policy despite forming the backbone of industrial supply chains.
2. What does the memorandum of understanding actually commit each organisation to? The agreement sets out a working relationship rather than a financial transaction. The CEA acts as a key industry partner, supplying sector-specific intelligence, employer perspectives and engagement opportunities into the Policy Centre’s research and policy activity. It will also encourage member participation in Enginuity-led initiatives, pilot programmes, workshops and briefings. Enginuity provides CEA members with access to research, insight and intelligence generated through the Policy Centre, covering emerging skills trends, workforce challenges and talent pipeline development. Both organisations have committed to joint policy advocacy, workforce development initiatives, industry engagement and communications activity, with shared engagement with government and policymakers on apprenticeships, workforce planning, future skills needs and industrial growth.
3. How does the Growth and Skills Levy change what employers can fund? The reformed levy retains the same basic structure, with employers whose annual pay bill exceeds £3 million contributing 0.5 per cent of payroll, but broadens what those funds can buy. From April 2026 employers can direct levy money towards apprenticeship units, short modular courses constructed from existing apprenticeship standards, with the first wave prioritising digital, artificial intelligence and engineering. Several restrictions accompany the flexibility. Levy funds now expire after twelve months rather than twenty-four, the 10 per cent top-up for levy payers has been removed, and co-investment rises to 25 per cent once funds are exhausted. Level 7 funding was restricted to new starters aged 16 to 21 from January 2026, and sixteen standards were scheduled for defunding from September 2026.
4. What support is available specifically for smaller construction equipment businesses? Non-levy-paying employers, meaning those with an annual pay bill below £3 million, now receive full government funding for apprenticeship training where the apprentice is under 25, removing the previous 5 per cent employer contribution. A cash incentive of £2,000 per apprentice aged 16 to 24 has also been introduced. Foundation apprenticeships at Level 2 are available in engineering, manufacturing and construction, offering a shorter entry route for school leavers and career changers, with employer support towards delivery costs. These represent the strongest financial incentives smaller employers have had for hiring and training young technical staff, though the value depends on whether available standards and units match the specific competencies off-highway machinery businesses require.
5. How reliable is the £5.2 billion skills gap figure? The estimate comes from Mind the Gap, commissioned by Enginuity and delivered by SQW in collaboration with Oxford Innovation Advice and Qa Research, published in June 2026. It combines employer survey evidence with economic modelling rather than resting on self-reported opinion alone. Enginuity presents the figure as approximately 2 per cent of the engineering and manufacturing sector’s annual output, with a separate finding that individual affected businesses may lose as much as 10 per cent of their gross value added, around £110,000 per company annually. As with any modelled estimate, the headline number carries assumptions about productivity loss attribution, but the underlying survey findings on vacancy rates and affected employee proportions are consistent with other sector evidence.
6. Why does classification within industrial strategy matter commercially? Government support increasingly flows through named channels. The Advanced Manufacturing Sector Plan identifies frontier sub-sectors for priority attention, allocates cluster funding to specific regions and industries, and directs skills investment towards defined occupational priorities. Construction equipment manufacturing was not named explicitly among those frontier industries, which means the sector must argue for inclusion in delivery mechanisms rather than receiving it by default. The practical consequences include eligibility for energy cost relief schemes, access to Advanced Manufacturing Cluster support, and whether construction equipment occupations feature in the apprenticeship standards and modular units that receive public funding. Evidence-based advocacy is the mechanism through which that inclusion is secured.
7. What technical skills are construction equipment employers struggling to source? Mind the Gap found technical manual skills to be the most sought-after capability, cited by 74 per cent of SMEs, covering the fabrication, assembly, hydraulics and mechanical competencies that underpin machinery manufacture and field service. Alongside these, employers reported growing gaps in digital, data and managerial capability. For the construction equipment sector specifically, this maps onto the shift towards telematics-equipped machines, advanced electronic control systems, emissions aftertreatment diagnostics and battery-electric drivelines. Service engineers now require competence spanning mechanical, hydraulic, electrical and software domains, a combination that traditional apprenticeship routes were not originally designed to deliver and which modular training units are intended to address.
8. How should equipment buyers and fleet managers factor this into procurement? Technical support capability is becoming a legitimate procurement criterion alongside machine specification and price. Buyers acquiring electrified or heavily digitalised equipment should assess the depth of the supplying dealer’s technician training programme, the availability of remote diagnostic support, and typical response times for complex electronic or high-voltage faults. Where a dealer network cannot support a product line adequately, the cost appears as extended downtime, warranty friction and weaker residual values at disposal. Fleet managers running mixed-brand operations face this most acutely. Asking suppliers directly about apprenticeship intake, technician retention and investment in modular upskilling is a reasonable and increasingly common part of tender evaluation.

Strategic Takeaways

1. Skills funding in England is now allocated through mechanisms that reward sectors capable of producing structured occupational evidence, making workforce data a competitive asset rather than an administrative record.
2. The construction equipment sector’s absence from the named frontier industries of the Advanced Manufacturing Sector Plan creates an advocacy requirement that trade bodies must meet with quantified evidence if the industry is to access cluster support, technical college provision and sector-specific funding.
3. Full government funding for under-25 apprentices at smaller employers, combined with £2,000 cash incentives, represents the most favourable training economics SMEs in the machinery supply chain have faced, and the window should be used to build electrification and diagnostic capability now rather than later.
4. Technician capability is emerging as a determinant of machine uptime and residual value, which makes dealer training infrastructure a legitimate factor in equipment procurement and in the valuation of aftermarket businesses.
5. Apprenticeship units offer a mechanism for targeted upskilling of experienced staff without multi-year commitments, but their relevance to off-highway machinery depends on occupational evidence submitted while the first wave of units is being designed.