Effects of the Apprenticeship Levy

The Apprenticeship Levy was introduced in April 2017, amid great fanfare. The government spend heavily on a direct advertising and outreach to businesses of all sizes to explain how the levy would work, what businesses should be doing, and how to get the best from the new system.

The levy, we were told, was an unprecedented opportunity for businesses to use government help to undertake a real investment in training and skills across a range of disciplines and sectors.

Clearly, five months in, it is too soon to judge whether the Levy has achieved what the government hopes. But for those in the industry, there are some clear trends emerging in the first few months of the new regime.

“I think it’s fair to say that in the run-up to the Levy’s introduction there was a dash for cash among some training providers that were keen to squeeze the last few drops out of the old funding regime,” says Ben Rowland, co-founder of Arch Apprentices, one of the UK’s leading training organisations.

“That’s not surprising, but what it also led to was a pretty steep drop in the number of starts in the immediate aftermath of the Levy’s introduction.”

Official figures have yet to be publicly released – it is unlikely the Dept for Business, Education, Industry and Skills (BEIS) would rush to publicise a drop in apprenticeship starts as a flagship policy launches – but Rowland believes that while the numbers may be disappointing in the short term, they mask a fair more encouraging long term trend.

“There was a feeling that the large employers would simply use the advent of the Levy to pick the lowest hanging fruit by starting generic, vanilla management apprenticeships in order to use up their funds. However, that hasn’t happened.

“Instead, the larger employers are concerned to get high quality training that will pay dividends long term. They are actually taking seriously the need to upskill their staff by using the Levy. Everyone has taken the time to think about it properly and we’re beginning to see movement albeit slowly.

Rowland says that, having spoken to a wide variety of clients, lots of businesses failed to really plan ahead before the Levy. Four months in, some are now experiencing a dynamic where business heads are slowly coming together as HR or finance raises flags over unused Levy funds

“And FDs and HRDs are saying, ‘you need a plan about how to use this money, because in six months’ time, if nothing has been done, there are going to be some serious questions asked.”

“So, given that, under the new Levy rules, business have two years to spend the money, if they don’t start soon they will lose that cash,” says Rowland.

So while some companies are currently behind the curve, for some, the next six months will see real progress. And central to that is a better understanding of how apprenticeship standards work.

Rowland reports that, typically, businesses look at the standards that currently exist and fear they may not be 100% perfect for their business’s needs; “Then they tend to hear about other standards in development and decide to wait for those. But they may not be perfect either,” he explains.

“As a result, we’re having lots of conversations about specific standards with HR directors asking whether it can do this or that; but actually when you there is scope for some limited customization, more and more are saying, ‘that’s fine, let’s go and make a start.’”

With that in mind, the next six months should see a real uptick in apprenticeship starts, which should make everyone – government, apprentices and business – very happy.

HRD Connect Curators of the New Business Landscape. HRD Connect produces industry-recognized content for senior HR leaders. Through articles, case studies, Q&As, podcasts, events, and more, we offer truly progressive and cutting-edge insights designed to help people leaders address core HR challenges and add greater value to their business.

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