What’s Going wrong with the Apprenticeship Levy?

Both the 2015 and 2017 Conservative Party election manifestos contained a commitment to creating three million new apprenticeships by 2020, as a means of ensuring that “young people acquire the skills to succeed”.  The apprenticeship levy was introduced in April 2017 to help pay for the increased level of training envisaged.  Employers who have a payroll of £3m or more pay a levy of 0.5% of their total pay bill towards funding for apprenticeship programmes – money which they can then draw down to train their own staff, or pass on to smaller businesses in their supply chain to train apprentices.

However, take up of the levy funding has been much lower than the Government anticipated, with only £370m of £2.7bn drawn down in the first 18 months of the new system.  Other changes, such as the requirement for 20% of training to be completed off-the-job, increased bureaucracy and the fact that the levy funding does not reflect the true cost of providing an apprenticeship, have also contributed to a significant fall in starts, with the Financial Times reporting that workplace training starts remain 15% below pre-levy levels nearly two years on from its introduction[1].

Our recent research with employers and training providers in North East Lincolnshire, undertaken as part of work to prepare a Local Economic Assessment, echoed these national concerns.  Training providers reported that small businesses in particular, struggled to understand the new funding rules, and found it hard to make the “co-investment” (financial contribution) required.  There was also concern that employers are now required to co-invest in apprenticeship training for young people (even those who do not hold qualifications at Level 2 or Level 3) and about the lack of flexibility which means that people can no longer begin an apprenticeship ‘on programme’ with a training provider, before moving into employment once they have acquired the core skills which employers in the area demand.

With employment at record levels, and evidence of a 6% fall in the number of EU nationals employed in the UK over the past twelve months[2], the need to develop the skills of the workforce is more important than ever.  Whilst addressing employer concerns about the apprenticeship levy scheme should be a key priority for Government, local stakeholders and training providers have a responsibility to help employers and young people make the best of the current system.

For more information on our work on employability and skills, please contact Cassie Houlden at cassie.houlden@ekosgen.co.uk


[1] UK government faces criticism over level of apprenticeship starts, Financial Times, 24th Jan 2019, https://www.ft.com/content/920e1d72-1fc5-11e9-b2f7-97e4dbd3580d