UK apprenticeship levy’s low take-up highlighted by survey

Two years after its launch, half of the companies covered by the scheme have yet to spend anything

About half the companies forced to set aside money under the apprenticeship levy have yet to spend the cash available to them for workplace training two years after the scheme was introduced.

The findings from a survey of 510 mid-cap businesses with turnover up to £1bn by accountancy firm Grant Thornton increase the pressure for reform of the levy system, whoever wins power at this week’s general election.

Organisations with annual wage bills in excess of £3m have been forced since April 2017 to set aside an equivalent of 0.5 per cent of this sum to fund approved workplace training programmes.

However, 45 per cent of the companies in the survey said they had not used any of the money in their levy pot, while 27 per cent said they were unclear about what benefits an apprentice would have in their business.

Such views are fuelling a belief that the apprenticeship levy is just a tax on big employers, according to David Hare, an associate director at Grant Thornton.

“They are dismissing it as not relevant to them,” he said. “When they hear the word apprentice, the idea of 16-year-olds working lathes springs to mind.”

A fifth of those not spending money on apprenticeships said workplace training would cost too much to create in their company.

Those that are spending their levy money are using a significant amount of their funds on higher level qualifications, including MBAs, meaning that even with a low take-up the levy budget could be bust.

Cambridge University Press is among the companies that have embraced the levy, setting up about 80 apprenticeships since it was introduced, ranging from a school leaver training as an accountant to managers studying at business school.

“The levy has been fantastic for us because the publishing industry needs to do a lot to attract a more diverse range of people. There are people who definitely would not have been hired by us if we were not offering apprenticeships,” said Heidi Mulvey, head of community engagement at Cambridge University Press.

However, she added that some of the company’s levy pot is now funding training it would already have funded from other sources, especially at the senior management level.

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All the main parties have pledged to change the way the levy system operates.

Both Labour and the Liberal Democrats have promised to widen the variety of training the levy can fund, while the Conservatives have proposed a £3bn national skills fund. Labour has also pledged to ringfence some of the money the levy raises for “climate apprenticeships”, teaching skills relevant to reducing organisations’ carbon footprints.

The challenge they all face is to expand the use of apprenticeships while ensuring that there is enough funding available to cover employers’ training needs.

The National Audit Office has warned that spending on more expensive masters degree apprenticeships has created a real risk of employers outspending the money generated by the levy.

A quarter of the companies in the Grant Thornton survey said they were unclear about the benefits an apprentice would bring to their business.

“Many dismiss it as irrelevant to them because they see it only as a recruitment tool,” Mr Hare said. “When they realise that it can be used to upskill existing staff, the perception of its value shifts pretty quickly.”