It’s National Apprenticeship Week and new research has found that only 4% of employers are spending their full apprenticeship levy funding.
Research conducted by City & Guilds and workplace learning advocates The 5% Club has found that employers have spent an average of just 55.5% of their apprenticeship levy funding in the past five years. In fact, only 4% of employers have used their full levy funding in that time.
It means that nearly half of the generated funding has not been used by levy-paying employers and risks going to waste. According to a City & Guilds’ survey of 1,000 HR leaders at levy-paying businesses across the UK, of those who haven’t used all of their levy funds, 94% report facing at least one barrier to accessing it:
- 18% say that access to funding involves too much bureaucracy or administration;
- 17% say they don’t have enough time to invest in the system;
- 19% say that they can’t commit to the length of time that an apprenticeship takes to complete.
The findings also reveal that a staggering 96% of UK businesses would like to see changes to the levy. However, rather than scrapping it, four in ten businesses (43%) say that they would prefer to shift towards a 50:50 model, whereby half of the levy is ring-fenced for apprenticeships and the other half is more flexible, allowing businesses to find the best way for them to meet their skills needs.
Kirstie Donnelly, ceo of City & Guilds, said: “This research reinforces previous calls we and the wider skills sector have made for more flexibility to the current system … Yet again the employer voice is coming through loud and clear - apprenticeships are a valuable recruitment and retention tool but the current system is just not working for them, leading to large sums of funding intended for the levy instead going back to the Treasury because they cannot be used, all this at a time of such acute skills gaps and shortages.”
In its new report, Levying Up, City & Guilds has set out key recommendations for reforming the apprenticeship levy, based on feedback from employers and business leaders:
- Give employers more flexibility on how they can spend levy funding;
- Cancel plans to reduce level 2 apprenticeships;
- Introduce modular learning options to better meet employer skills needs;
- Allocate unspent apprenticeship levy funding to programmes designed to reduce skills shortages in key sectors.
FSB calls for £3,000 apprenticeship incentive
The Federation of Small Businesses (FSB) is calling for the re-introduction of the £3,000 apprenticeship incentive in England for under-25s and small businesses to help tackle skills shortages.
Figures from the Department for Education (DfE) show the significant impact of the government’s increased apprenticeship incentive during the pandemic. The boost, from £2,000 for young apprentices and £1,500 for older apprentices, to £3,000 for all age groups, led to a 21% surge in apprenticeship starts.
But with the reduction back to £1,000 for under-19s and care leavers only, apprenticeship starts have plummeted by 12%. FSB policy chair Tina McKenzie said: “The government’s increase of the apprenticeship incentive was a welcome effort in supporting young talent during the pandemic, but that funding was temporary, and it has been disheartening to see that commitment fall away. The correlation between the drop in apprenticeship starts and the reduction in financial incentives is plain to see.
“As the chancellor looks to use his March budget to boost labour market participation and growth, he could start in no better place than by using National Apprenticeship Week to announce that he will introduce £3,000 for under-25s and SMEs, which could help unlock long-term, economic benefits for generations to come.”
Written by Rachel Miller.