Rising employment costs are forcing UK small businesses to cut spending on staff training, potentially restricting opportunities for young people entering the workforce, according to research from the Federation of Small Businesses (FSB).

Almost a third of small employers have reduced their training budgets because of higher tax bills, while 27 per cent have cut training in response to rising labour costs, the business group found.

The findings come as thousands of students receive their A Level and T Level results and consider alternatives including university, apprenticeships and entering the workforce.

Small businesses play a significant role in providing early career opportunities. Four in five companies that recruited apprentices over the past three years hired someone aged between 16 and 24, according to the FSB's Learning Curves report.

However, employers identified employment costs, training and assessment fees, management time and paperwork as significant barriers to taking on apprentices.

The report found that 84 per cent of small employers provided training to existing staff during the previous 12 months, with more than two-thirds funding it themselves. Those businesses spent an average of £1,810 per employee.

The FSB said there was also scope for closer links between small businesses and education providers. While 57 per cent had engaged with at least one part of the education, skills or welfare system over the past three years, 43 per cent had no involvement.

The business group is calling on the government to introduce measures including an SME training tax credit covering 20 per cent of accredited training costs, payments for employers offering their first work experience placement and a national apprenticeship brokerage system connecting young people with smaller companies.

It also wants sector-based networks to help employers identify suitable training and closer links between businesses, schools and colleges.

Tina McKenzie, interim national chair of the FSB, said small companies were already important employers of young people but needed greater support from the skills system.

"Small businesses already do a great job of taking on this fresh talent, but there needs to be a renewed focus by the Government on backing small firms and making the process easier for employers," she said.

McKenzie added that reforms to technical education and apprenticeships needed to reflect the particular constraints faced by smaller employers, arguing that better skills support could help companies increase productivity and grow.