‘Serious turbulence’: the apprenticeship levy from a business perspective

The apprenticeship levy has all the right intentions, writes Dr Adam Marshall. But greater clarity is still required

Adam Marshall

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The introduction of the apprenticeship levy this year has created some serious turbulence. While the intentions are right – to create a ring-fenced pot of money for training and to encourage more companies to consider apprenticeship training – the implementation has left something to be desired. 

Ministers sometimes forget that it’s the quality of the training – not just the quantity – that businesses truly value. The priority must be to create more opportunities for people to learn and develop in the workplace, and help businesses fill skills gaps – not just to hit some arbitrary numerical target. 

The rollout of the levy was blighted by a lack of clear and early guidance for companies, which left many unsure about how the levy would work, and what it would mean for their firm. Even as the April deadline loomed and passed, many levy-paying companies – and British Chambers of Commerce and other business organisations that represent them – remained in the dark about the practicalities of the system. This increased the perception that the levy was just a payroll tax, rather than something valuable and to be engaged with. 

There is also uncertainty around the delivery of apprenticeships for those who do not pay the levy. Many businesses are below the £3 million levy threshold but want to take on apprentices – but the investment they must make to do so is changing, and the system for delivery and support is not yet clear. For the new generation of apprenticeships to work for smaller firms, businesses need to understand how to take advantage of the opportunities that the new system is intended to create.

My organisation would like reassurance that levy money is ringfenced – and accessible for businesses to draw down for their own training needs – in Northern Ireland, Scotland and Wales. None of the three devolved governments are so far following the English model – and businesses fear that the extra money they are paying into the levy is simply being used to fund existing programmes over which they have little control. If businesses are being asked to pay more to fund training, the quid pro quo has to be to give them more of a say over how those funds are deployed. 

Theory vs implementation

British Chambers of Commerce would also like government to allow greater flexibility for businesses to use levy funding for other forms of accredited, high-quality training. While no business should be given levy funds just to replace their existing training spending, apprenticeships are not the only form of high-quality training out there. A good training levy should recognise this, as is the case in many other countries. 

Even more important is the option for big companies to pass levy funding they are unable to use directly to their supply chain companies. This would boost productivity, make supply chains more competitive, and be a win-win for all. Ministers have spoken vaguely about allowing a small percentage to pass in this way, but must go further – as nothing would be worse than seeing this crucial training funding disappear from the front line. Clearer guidance around rules for apprentices to spend time on off-the-job training is also needed.

Research conducted by the British Chambers of Commerce network last year showed half of UK businesses don’t expect to recover all of their levy payment. If the terms of levy funding use are not broadened, many UK businesses will simply view it as another tax, which at a time of mounting upfront costs is counterproductive to growth and recruitment opportunities.

Businesses, by and large, acknowledge and understand the logic behind the apprenticeship levy, which seeks to create a ring-fenced pot of money to encourage vocational training. But there is a difference between the theory and implementation, where there are very real concerns about poor communication, implementation and lack of clarity in the nations of the UK. Unless corrected at pace, these factors could lead to a hardening business view that the levy is simply a payroll tax, rather a tool for growth. 

UK businesses today face recruitment difficulties at near-record levels. A stable, easily-understandable and coherent vocational training system is crucial at a time when the UK's immigration regime also faces significant, once in a generation change. 

Collaboration between government, business and education is the only way for the UK to create the pipeline of talent it needs to remain a competitive and entrepreneurial economy. Together, we must ensure that investment in training is seen as a top priority and that giving young people and members of the existing workforce the maximum number of development opportunities becomes part of our business culture. While we can start by getting the apprenticeship levy right, this is a long-term agenda – but the single most crucial one we face in the months and years ahead. After all, a business is nothing without its people. 

Dr Adam Marshall is director general of the British Chambers of Commerce

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