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The success of the New Deal policies - particularly the Welfare to Work and University for Industry initiatives - will depend crucially on the co-operation of the vital small and medium-sized enterprises (SME) sector of British Industry. In turn, the reaction of small employers to the new policies will be structured by the national vocational eduction and training (VET) efforts and the vocational qualifications system. Against the background of research on SMEs in the West Midlands region, the author argues that the New Deal policies will fail to engage with SME needs and interests unless the Qualifications and Curriculum Authority (QCA) effectively abandons the old agenda of the former National Council for Vocational Qualifications (NCVQ) in its ongoing restructuring and radical review of issues and policies for VET. There needs to be an acknowledgment that the reforms of the 1990s have demonstrably failed to meet any of the objectives set for them. The New Deal requires new policies which place an emphasis on skills training and high quality VET programmes, not primarily on the achievement of certificates to meet national targets.