Board Insight

Apprenticeships – What Next? – by Tim Jones

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A critical element of the national education programme, is ensuring that all of our valued workers have suitable skills to match the requirements of businesses and fulfil a meaningful career. Without this, many of the successful businesses across Northern Devon would struggle to grow and keep pace with demand.

In order to ensure that the UK maintains its international reputation, for being a centre of skills excellence, there has been a focus on Further and Higher Education being an essential part of ensuring that the best skills are available.

It was former Prime Minister – Tony Blair – who said that he was seeking to achieve a target, whereby at least 50% of those leaving school had the opportunity of entering into the world of Universities.

These lofty ambitions, however laudable, quite quickly exposed a gap in that there was a mismatch between the acquired skills and the needs of business. To address this problem an apprenticeship scheme was introduced, which effectively delivered in-work training. This scheme has been operational for over 6 years. In order to fund it a levy system was introduced in 2017, whereby all UK employers with a wage bill of more than £3 million a year, pay 0.5% of their total pay bill (minus an allowance of £15,000 a year) into a Levy pot.

The system then established a series of different grades of apprentice (general and high level), this then enabled all businesses to take on apprentices with a view to hopefully ensuring that they became a long term part of the recruiting business.

The scheme has stumbled along and the latest figures show that it is still not achieving any where near the targets originally set and therefore not satisfying business need. The decline in apprenticeships goes back to the very start in around 2015. The latest official figures show that, in the last academic year to July 2023, 337,140 apprentices started training, down 3% on the year before and far lower than the total in 2015 of 509,400. A total 162,320 apprentices completed their training in 2023 up from 144,530 in 2022. In the last quarter of the latest academic year, 37,400 apprentices completed their course, up by 22% on the same period in 2022.

These figures demonstrate a scheme which could and should work but which is flip flopping at an alarming rate. The government need to ensure that this is successful, as it is one of their main skills flagship policies.

They are also aware that spending by businesses on training their workers has fallen by over 20% in the last 10 years. These figures are higher amongst larger businesses where expenditure has fallen by around 35% and by a staggering 38% in the public sector. One of the worst performing areas in the country is in the South West. The inevitable consequence of this is that the UK economy will continue to be constrained by poor productivity. This is one of the great national challenges to try and reverse our dismal productivity growth which has persisted since the financial crisis in 2008. The UK is well behind many of our near European neighbours and also an increasing number of emerging far eastern economies. The South West is at least 10% behind the national productivity output and sadly Northern Devon is one of the worst performing areas.

The government are seeking to tweak the system yet again and have announced a series of reforms, such as encouraging small and medium sized businesses to recruit more by scrapping the 5% contribution that was chargeable to fund those aged under 22. There is also additional money to support initiatives and recruitment generally. The larger companies who pay the Levy also now have more freedom to pass unused training budgets to other small companies. Notwithstanding this, there is huge pressure from big employers to change the system. Currently, a large consortium of them are lobbying to use more of the £3.9 billion a year Levy to upskill their existing staff. If this happened, it is estimated that apprentices would reduce by around 50%.

Despite all of the understandable concerns with the system, the basic principles are sound. The outcomes for both businesses and the apprentices are highly desirable. This is therefore a programme which we should start to more actively support. A Northern Devon wide collaboration could be the clue to improving recruitment and, as a consequence, our productivity. If we could be “Best in Class” with this, it would be another example of the potential Northern Devon has to grow rapidly.