Development crisis | Apprenticeships fall by a third, casting doubt on the Apprenticeship Levy scheme

Apprenticeships fall by a third, casting doubt on the Apprenticeship Levy scheme

The number of people starting apprenticeships in the United Kingdom has plunged by more than a third since the introduction of the Apprenticeship Levy in 2017.

The data, which was published in a recent report from the CIPD, shows a staggering 49% decline in apprenticeships within SMEs.

This concerning trend not only hampers the prospects of the younger generation but also casts a shadow over the UK's economic and social mobility.

The Apprenticeship Levy mandates that businesses with a wage bill exceeding £3million annually contribute 0.5% of their payroll costs to a training fund, which they can use for specified training schemes.

The CIPD report found that this system, instead of rejuvenating apprenticeships, has witnessed a significant decline in both starts and completions.

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The statistics are alarming, with apprenticeship starts in small and medium-sized companies falling from 241,000 in 2016/17 to a mere 123,800 in 2020/21. This sharp 49% drop is reflects a broader trend of decreasing investment in training across the UK, despite a substantial increase in skill shortage vacancies.

The situation is exacerbated by the disproportionate impact on young people from economically disadvantaged backgrounds.

The Economy 2030 inquiry revealed that 16% of individuals aged 25 and under who were employed in January 2020 found themselves jobless a year later, compared to just over six per cent for workers over 25.

For those from the poorest 20% of households, a staggering 40% of those employed in January 2020 became unemployed between April 2020 and March 2021, as opposed to 16% in the top 80% income bracket.

This situation reflects a steep decline in social and economic mobility, further compounded by the fact that the UK already has one of the poorest rates of social mobility improvement among developed nations.

In response to the findings, the CIPD is now calling for a fundamental reform of the Apprenticeship Levy to create more flexible training opportunities.

The report suggests that longer apprenticeships, lasting at least two years, with a particular focus on younger workers, should be promoted to provide a sustainable solution to the current crisis.

The decline in employer investment in training and apprenticeships is occurring at a time when the number of skills shortage vacancies in England has more than doubled, increasing from 193,800 in 2017 to 460,100 in 2022.

Lizzie Crowley, Senior Policy Adviser at the CIPD, emphasised the importance of investing in training and development to address skill gaps and improve workplace productivity.

She called for the Apprenticeship Levy to be transformed into a flexible skills levy, enabling more funding for investment in apprenticeships and technical skills.

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“There are still major barriers in engagement with the current skills system, including its complexity, lack of resources, and poor people management capability,” she said.

“Good quality advisory and business support services, aimed at boosting management capability and increasing understanding of skills development, are key to engaging small businesses.

The CIPD's recommendations to policymakers include reforming the Apprenticeship Levy, enhancing management capability in small businesses, refocusing apprenticeship policies to include direct financial incentives, and introducing fast-track routes to apprenticeship qualifications for adults with existing workplace skills.

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