As part of the Government’s drive to create three million apprenticeships and double the size of the apprenticeship market to £2.5billion by 2020, an apprentice levy has been introduced.
The Government had been planning to cut funding for 16-18 year old training by up to 30% as part of the new apprenticeship levy regime, but heeded warnings from businesses and campaigners and changed course. The new system includes ear-marking £60million to help those in the most disadvantaged areas in the UK.
The levy will be paid by all employers with a wage bill in excess of £3million from April 2017. The top two per cent of employers will contribute 0.5% of wages to the levy.
Speaking to James Local, Director at Livingstone, he believes that results, value for money and quality will be chief concerns due to the use of providers. “In this context, providers with a track record of delivery, which specialise in employer-centric, high quality courses are likely to benefit enormously,” he explains. “Those with rigid cost bases or which deliver less sought-after relevant apprenticeships may suffer.
“Providers with a significant proportion of large employers may see demand increase, if those employers currently employ fewer apprentices than the cost of the levy would now cover. This won’t apply to all, as some employers are already active users of apprentices, and this change will simply represent a funding shift, and is unlikely to affect supply.
“Gone are the days when providers could offer level 3 and 4 technical apprenticeships and be assured of the top level of funding. It is likely that, in opening up the system in this way, market forces will result in a thinning of the provider base and the range and number of courses is likely to decrease as corporate training spend becomes focused on the best and most relevant courses.
“The dynamics of demand and pricing will vary from employer to employer, and providers will therefore need to analyse their customer base carefully to understand the likely impact. This will make those providers with a reputation for high quality, content and courses paired with a well-focused sales force ideally positioned to succeed.
“To provide a consistent service to large employers, it is also likely we will see many of the providers looking to expand across the country to develop a nationwide footprint and increase their share of employer training spend. Good quality providers could become both acquirers and targets depending on their scale, and sub-contractors may well find themselves vertically integrated.
“The winners out of all of this will be providers with a well-established track record of delivery and niche providers which excel in specific sectors – both will need to be nimble enough to offer attractive courses at a keen price.
“In addition, any volume increase in the market may be offset by employer-led price pressure and the change in funding tariffs for individual courses. The SFA’s funding bands have been reduced by over £1,000 on average, with a number of high skilled courses (mainly those that previously attracted up to £27,000 of SFA funding) having been cut by £9,000-12,000 as part of the move from frameworks to standards.”