Apprenticeships have long been a crucial pathway for nurturing talent and skilling the workforce in the UK, particularly for small and medium-sized enterprises (SMEs).
However, recent reports indicate a concerning trend: there has been a significant decline in the number of apprenticeship starts in SMEs since the introduction of the apprenticeship levy.
This downturn not only highlights the complexities of the levy system but also raises questions about the future of vocational education and training in the UK’s diverse business landscape.
The Apprenticeship Levy: Good Intentions, Unintended Consequences
In an effort to inject vitality into the UK’s skills development framework, the government introduced the apprenticeship levy.
The ambition was clear: to bolster skills funding, especially for SMEs, by enabling them to access funds accumulated through larger businesses’ contributions.
Yet, a study by the Chartered Institute of Personnel and Development (CIPD) has revealed a stark reality – a 49% reduction in apprenticeship starts among SMEs in England since the levy’s implementation.
While the levy aimed to democratize funding for skills development, the reality seems to misalign with these noble intentions.
Larger organisations have experienced a smaller drop of 14% in apprenticeship starts, but SMEs have been hit disproportionately hard.
A Closer Look at the Data
The CIPD report sheds light on this issue, noting a decrease in apprenticeship starts from 241,000 in the 2016-17 period to just 123,800 in 2020-21 within English SMEs.
Nationally, the number of people taking up apprenticeships has plummeted by 31% since 2017.
This decline has been accompanied by a worrying trend: despite around two-thirds of apprenticeship starts in 2023 being levy-funded, fewer opportunities are reaching disadvantaged and younger learners.
Furthermore, employers seem to prefer funnelling the levy funds into higher-level qualifications and upskilling current employees, rather than investing in new talent at the foundational levels.
This shift could have long-term implications for the development of entry-level skills and the accessibility of apprenticeships for all.
A Dip in Learning Investment
Alarmingly, the CIPD’s analysis suggests a continuous decline in employer training investment since 2011, with a 19% reduction in learning and development funding.
The UK’s per-employee investment stands at approximately half of the EU average, calling into question the UK’s commitment to nurturing a competitive, skilled workforce.
Rethinking the Levy, Tackling Skill Gaps and Addressing Labour Shortages
The apprenticeship levy’s current state has sparked a renewed call from the CIPD for its reform.
They urge a transformation into a flexible “skills levy” that could encourage broader and more meaningful employer investment in workforce development.
Additionally, they advocate for the government to bolster advisory services that cater to SMEs’ unique needs, particularly in HR and people management.
Lizzie Crowley, a senior policy adviser at the CIPD, emphasises that resolving skills and labour shortages across the UK is imperative.
“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” Crowley states.
Investment in training is a cornerstone of addressing skill gaps and enhancing workplace productivity.
Yet, as the apprenticeship levy struggles to make a mark in reversing the training decline, it’s clear that a new strategy is essential.
SMEs at a Crossroads and The Road Ahead
Despite the critical role of SMEs in the UK economy, their engagement with the current skills system is fraught with barriers: complexity, resource scarcity, and limited people management expertise.
Crowley asserts that robust advisory services, geared towards enhancing management capability and comprehension of skills development, could be crucial in drawing SMEs into the fold.
As the UK grapples with more than doubling the number of skills shortage vacancies from 2017 to 2022, the CIPD’s call for a more adaptable skills levy seems more pertinent than ever.
This proposed reform could pave the way for employers to invest not only in immediate upskilling but also in the long-term development of technical competencies critical to the UK’s economic resilience.
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