Apprenticeship starts plummet 31 per cent since introduction of levy, CIPD report reveals

Association calls for reform of the system, as employers face nationwide talent shortage and rising job vacancies

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The number of people starting apprenticeships has fallen 31 per cent in England since the apprenticeship levy was introduced in 2017, according to the CIPD’s Devolution and evolution in UK skills policy report.

This was particularly acute among small businesses, where the number of apprentices starting declined by 49 per cent, with just 123,800 apprenticeships starting in SMEs in England throughout 2020-21, compared to 241,000 in 2016-17.

Meanwhile, large firms with 250 or more employees saw a drop of 14 per cent. 

The levy was introduced to help companies hire more apprentices by giving them greater control over government funding for apprenticeships. But critics have claimed it has led to employers putting existing staff on to professional or managerial apprenticeships rather than taking on new apprentices, as well as being inflexible and complex to navigate.

Ola Kolade, employment and skills director at Business in the Community, said the figures showed that reform is needed to the levy to benefit businesses and those looking to enter the workplace. He told People Management: “It is essential that the apprenticeship levy works in practice for both businesses and people looking for apprenticeships. 

“Unfortunately, this research shows that the levy is not working as effectively as it should be, especially for young people. If research continues to show that the levy is not working, it should be reformed in collaboration with business leaders and training providers to help address why it’s not working on the ground.”

The figures come as workplaces across the country face longstanding talent and labour shortages, with the number of vacancies in England more than doubling between 2017 and 2022, from 193,800 to 460,100.

“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,” said Lizzie Crowley, senior policy adviser at the CIPD.

She stressed that investing in training was “critical in addressing skill gaps and improving workplace productivity”, adding that the levy “has failed to reverse the decline in training we’ve seen over the past two decades”.

The CIPD also found that employers were training and investing less in their workforces than they were 20 years ago, and investment in training per employee has declined by almost 20 per cent since 2011 across the UK.

It called for the apprenticeship levy to be reformed into a “flexible skills levy”, which Crowley said could “help boost employer investment in the technical skills they need and free up more funding to invest in apprenticeships”.

Other recommendations included the introduction of fast-track routes to apprenticeship qualifications and financial incentives for businesses that hire apprentices, as well as government support for advisory services covering HR and people management for SMEs.

Businesses have expressed their concerns over the levy since it was first introduced, with a CIPD poll last April finding that fewer than one in five employers supported the apprenticeship levy. 

Read the CIPD’s case for a broader training levy here