However, the report warns that continued policy uncertainty and funding pressures risk undermining future investment and growth.
The inaugural State of the Skills Sector 2026 survey, based on responses from 120 organisations across the skills sector, paints a picture of providers that are resilient, ambitious and ready to adapt, while calling for greater certainty from government to enable long-term planning.
More than four in five respondents (81%) rated their organisation's performance as good or very strong, 72% said they were confident about their future prospects and more than half (54%) reported their financial position had improved over the past year. However, confidence fell sharply when providers were asked about the wider operating environment.
Nearly three-quarters (72%) identified policy uncertainty as one of their biggest pressures, 69% said current funding arrangements do not support sustainable delivery, and only 15% believe government policy provides enough clarity for long-term planning.
The report also finds that providers are embracing change rather than resisting it. Apprenticeship reform, employer engagement and artificial intelligence all feature prominently in organisations' future plans, but respondents repeatedly stress that successful reform depends on practical implementation, sustainable funding and sufficient time to adapt.
Employer engagement also emerges as more than a growth priority. In apprenticeship delivery, employers are an active part of the learning model, not simply a customer group. Their involvement, responsiveness and ability to provide timely feedback directly influences learner progress, evidence collection and successful completion.
With 56% of providers planning to invest further in employer engagement and growth, the report suggests providers are looking to strengthen both demand generation and delivery relationships. However, as provision becomes more flexible and employer expectations continue to evolve, providers will need stronger ways to manage these relationships at scale. This includes understanding where employer engagement is strong, where it is weakening, and where earlier intervention could help protect learner progress.
The report also highlights important strategic questions for the sector. Despite the growing national focus on young people and AI, fewer than half of providers expect to increase their focus on younger learners (44%), while only 51% plan to invest in AI and automation over the next two to three years.
This exposes a particularly important challenge for the sector. While many providers are already exploring AI for administrative efficiency, the next phase of adoption is likely to be more fundamental. As learner support needs, funding complexity, compliance expectations and employer demand all increase, providers will need new ways to see risks earlier, prioritise human intervention and make better use of the data already sitting across their organisations.
For providers, the question is no longer simply whether AI can save time, but how it can help delivery teams operate with greater visibility, consistency and control. That could include identifying early signs of learner disengagement, surfacing evidence gaps before they become audit risks, prompting timely tutor intervention, or highlighting when an employer relationship is starting to affect learner progress. The findings therefore suggest a significant potential readiness gap – providers remain confident and ambitious, but those not yet planning to invest in AI and automation may find it increasingly difficult to scale support, responsiveness and assurance in a more complex skills environment.
Ben Rowland, CEO of AELP, said:
"This inaugural AELP/Bud Systems State of the Skills Sector Survey comes at a pivotal moment for providers.
The skills system is undergoing significant change, from apprenticeship reform and devolution to growing expectations around supporting young people, meeting employer demand and embracing new technologies. Understanding how providers view these changes is essential if policy is to reflect the realities of delivery.
The findings present a thoughtful and, at times, challenging picture. They show providers that remain confident in their own organisations while expressing much lower confidence in the policy and funding environment in which they operate. They also raise important questions for the sector itself. While supporting more young people and harnessing the opportunities presented by AI feature prominently in national debate, only 44% of respondents expect a greater focus on younger learners, and just 51% plan to invest in AI and automation over the next two to three years. At a time when both are central to the future of skills, those findings raise as many questions as they answer.
Good policy starts with good evidence. We hope this report informs discussion across government, providers and employers, helping to shape decisions that strengthen the skills system and create greater opportunity for learners."
John Ingram, CEO of Bud Systems, said:
“Funded skills providers are showing real resilience and ambition in a period of significant change. But the findings also point to a sector that is being asked to do more, respond faster and operate with greater assurance, often without the clarity or stability needed to plan confidently.
For Bud, the AI finding is particularly important. If almost half of providers are not yet planning to invest in AI and automation, we need to ask how the sector will scale learner support, employer engagement and compliance confidence over the next few years. AI should not be seen simply as another efficiency tool or chatbot. Used responsibly, with the right data, governance and human oversight, it helps providers see what is changing across delivery, identify risks earlier and direct skilled people to the moments where their judgement matters most.
This is not about replacing tutors, coaches or provider teams - it is about extending their reach. The providers that succeed in the next phase of reform will be those that can combine human expertise with better operational visibility, better use of data and greater confidence in how they respond to learners and employers.
We are proud to partner with AELP on this research and hope it supports constructive discussion across government, providers, employers and technology partners about what the sector needs next.”
About AELP
The Association of Employment and Learning Providers (AELP) is a national membership body, proudly representing organisations operating in the skills sector. AELP members deliver a range of training and vocational learning – including the majority of apprenticeships as well as Skills Bootcamps, 16-19 Study Programme, Adult Education Budget and more.
About Bud Systems
Bud Systems is the specialist SaaS platform built for funded skills providers and designed to help organisations navigate the growing complexity of apprenticeships and funded learning with confidence. By bringing together learner management, funding, compliance, employer engagement and delivery data in one platform, Bud enables providers across the UK skills sector to operate with greater visibility, control and assurance.
For further information or interviews please contact Matt Strong, Head of External Communications, AELP, on 07535 719296 or mstrong@aelp.org.uk