The number of apprentices starting in small businesses has plummeted since reforms to vocational training were introduced in 2017.
A report has revealed that apprenticeship “starts” in small and medium-sized companies fell by 49 per cent between 2017 and 2021, from 241,000 to 123,800. At the same time, there was a 14 per cent fall in new apprenticeships at large companies, with overall starts falling by 31 per cent since the introduction of the apprenticeship levy, which was supposed to boost the supply of skilled workers.
The levy requires businesses with an annual wage bill of more than £3 million to pay 0.5 per cent of their payroll costs into a training fund. They can use the cash for qualifying training schemes. Both starts and completions have fallen since it was implemented.
Small companies are supposed to be able to access levy funds, yet over the past five years £4.3 billion was raised but not spent on apprenticeships and was kept by, or returned to, the Treasury.
The report from the Chartered Institute of Personnel and Development, said the levy also had failed to reverse the decline in wider training by employers, one of the policy objectives. Investment in training per employee in the UK has declined by 19 per cent since 2011, from £2,191 to £1,778, with investment per employee at half the level of the European Union average, the institute said.
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Six in ten British employers provided some sort of training in the past 12 months, a drop from two in three in 2017.
The group said the poor returns from the levy had coincided with a period of significant skills shortages and high vacancy rates in many industries. It said the levy must be reformed and turned into a “flexible skills levy”. It believes that formal apprenticeships are often the wrong training route and that shorter, more intensive courses are often more efficient and more easily tailored to tackle skills shortages.
Lizzie Crowley, senior policy adviser at the institute, the professional body for human resources and people development, said: “Skills and labour shortages continue to be a real problem across the UK and all sectors of the economy and we need to get apprenticeships and vocational education right if we’re to tackle these challenges. The levy has failed to reverse the decline in training we’ve seen over the past two decades.”
The group suggested reforms such as greater incentives for small companies to hire apprentices and “fast-track” routes to apprenticeship qualifications for adults with existing workplace skills.
Tesco is among big employers that have criticised the policy. In February, Ken Murphy, its chief executive, said the retailer was offering fewer apprenticeships than before the levy was introduced because of “inflexible” rules. Tesco said it had contributed £100 million to the levy since 2017 but had only used 14 per cent of that.
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Martin McTague, national chairman of the Federation of Small Businesses, said small companies must be guaranteed at least the same level of funding they get for apprentices now under reforms, which “must work to reverse the dramatic fall in the number of starts”.
In May, a report by the Policy Exchange think tank said the system had enjoyed “some successes”, but concluded that it “is not currently delivering the number of high-quality apprenticeships that our country needs”.
Apprenticeship completion rates fell from 65 per cent in 2019 to 58 per cent in 2021. Calls for reform have included allowing shorter and more flexible courses of high immediate value to the economy, from lorry driving to coding, to be eligible for funding from the levy.
Crowley said smaller companies needed more help in accessing the system. “Despite the importance of [small firms] to the UK economy, there are still major barriers in their engagement with the current skills system, including its complexity, lack of resources and poor people management capability.”
The Department for Education was approached for comment.
