Why are apprenticeship numbers falling?

Policy: The North East had the greatest number of apprenticeship starts per 1000 people in employment in 2015/16, but the total number of starts has fallen by a third. Local agencies and businesses need to work together to address this issue, says Paul Carbert, North East England Chamber of Commerce policy adviser

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This month marks two years since the introduction of significant reforms to apprenticeships policy in England, and it is a good time to take stock and review the impact of the changes.

The Chamber is a champion of apprenticeships because our members see the huge benefits that they bring to their organisations.

Apprenticeships have been the first step on the career ladder for some of the top business leaders in the North East, and they have continued to champion the use of apprenticeships to bring in new talent and give existing staff the opportunity to retrain.

The apprenticeship reforms introduced in April 2017 were intended to increase the number of apprenticeship starts –
the Government had pledged to deliver three million new apprenticeships between 2015 and 2020 – and increase the quality of training, by putting employers in charge of designing new apprenticeship standards.

The introduction of the apprenticeship levy, a charge on employers with total payroll costs of over £3m a year, was a key part of the reforms. The Government intended to use the funds raised by the levy to double the amount of money available for apprenticeship training, with levy payers given two years to spend their individual contributions (plus a 10 per cent top-up) before the funds would be pooled to pay for apprenticeships for non-levy payers.

The reforms also brought in a charge for smaller businesses with payroll costs of less than £3m. Initially set at 10 per cent of the training costs for an apprenticeship, although now this has been reduced to five per cent, for many SMEs this was the first time that they had had to pay for apprenticeship training.

“In the year prior to the introduction of the reforms, apprenticeship programme starts in the North East grew at a faster rate than in any other UK region. The North East had the greatest number of apprenticeship starts per 1000 people in employment in 2015/16, triple the number in London.”

The North East has long been a hotspot for apprenticeships, with a huge variety of opportunities from trade apprentices in construction, a strong tradition of workplace training in manufacturing and engineering, and a forward-thinking attitude to new apprenticeships in professional services and law. Our region also has one of the highest rates of pupils choosing an apprenticeship at 16.

In the year prior to the introduction of the reforms, apprenticeship programme starts in the North East grew at a faster rate than in any other UK region. The North East had the greatest number of apprenticeship starts per 1000 people in employment in 2015/16, triple the number in London. Today, although we still have the highest ratio of apprentices, the lead has narrowed significantly, and the total number of starts has fallen by a third.

Digging deeper into the numbers, the biggest decline has been among apprentices aged over 24 studying courses at Level 2. There has been an increase in Higher and Degree level apprenticeships, but not enough to match the fall in starts at Level 2 and 3.

From my conversations with members over the past two years, there are a number of contributing factors that explain the fall in numbers.

Businesses will always need time to adjust to significant reforms like the levy and the introduction of apprenticeship standards, and there was a rush to get apprenticeships started on the old funding rules before the April 2017 deadline.

Many levy payers that already used apprenticeships took the opportunity to review their training strategies. For some companies, this meant an increase in the use of higher and degree apprenticeships in leadership and management for existing staff – a move towards fewer, more costly apprenticeships.

Chamber members that joined trailblazer groups to develop new apprenticeship standards reported that the process can be time-consuming and frustrating, as the plans they submitted were rejected for arbitrary reasons after months of consideration by the Institute for Apprenticeships.

Although there are signs that this has improved in the two years since the reforms, it remains the case that there are many in-demand apprenticeship standards awaiting approval.

As levy funds can only be used to pay for the cost of training, several members have reported that the increasing additional costs of taking on an apprenticeship are a barrier. These costs include staff time for training and mentoring, and backfilling for apprentices when they are off the job.

The requirement for 20 per cent of an apprentice’s time to be spent training off-the-job is frequently mentioned as a challenge. Official advice about what can be included in the rules has been confusing and sometimes contradictory, although again there are now signs of improvement.

The Chamber has been campaigning for a number of changes to fix these issues.

As our region has fewer large employers than most other areas, it is vital that funding for non-levy payers remains available. The Government currently funds providers directly to deliver apprenticeships to non-levy payers, but the process of allocating these funds has been badly flawed. This causes uncertainty for providers and the lack of a coherent system adds to the complexity for employers and risks discouraging SMEs from using apprenticeships.

There are a number of brilliant examples in the region of employers in the same sector coming together to create a viable cohort of apprentices and refining the course content to meet their needs. The chemical and process sector has led the way here, with the Science Industries Apprenticeship Consortium and the STEM Apprenticeship Consortium in Northumberland.

However, these groups rely on committed individuals to give up their time with no additional resources available, and we believe the Government could be doing much more to support this type of activity.

The recent increase in the amount that levy payers can transfer to other companies, locally and in their supply chains, could be a great catalyst for this if there was more flexibility on the use of funding or a centralised support system.

To drive up demand for apprenticeships, we have been working with members on a campaign to improve careers advice and make sure that young people in the North East are aware of all of the options when they leave education. This must involve parents, who have a strong influence on their children’s career choices.

The Government has announced that they will be conducting a review of the apprenticeship reforms over the coming months, and we encourage members to get in touch with their views to inform our response.