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Education Secretary Gillian Keegan has criticised large employers advocating for a shift in apprentice levy funds, highlighting potential repercussions for young apprenticeships.
Keegan’s remarks come amid lobbying efforts from major companies to utilise more of the £3.9 billion annual apprentice levy for up-skilling existing staff rather than investing in young apprentices. She warned that such a move would divert crucial funding from SMEs, which currently contribute around 30% of the 337,000 annual apprenticeship placements.
The apprentice levy, introduced in 2017, mandates all UK employers with a wage bill exceeding £3 million per year to allocate 0.5% of their pay bill (minus a £15,000 annual allowance) towards apprenticeships.
While some large retailers like Marks & Spencer, Superdrug, and the Co-operative Group have advocated for an overhaul of the apprentice levy, Keegan emphasized the potential negative impact on apprentice opportunities. She cautioned that allowing companies to redirect funds from apprenticeships to other forms of training could halve the number of available apprenticeships, hindering young people’s access to career opportunities.
Keegan’s concerns align with the government’s efforts to incentivize SMEs to offer more apprenticeships. Recent reforms include abolishing the 5% contribution requirement for SMEs funding apprenticeships for those under 22 and allocating £60 million in funding to support additional apprenticeship placements.
While these measures aim to bolster apprentice numbers, reactions from business groups have been mixed. While Martin McTague of the Federation of Small Businesses praised the initiatives as beneficial for SMEs, larger companies expressed dissatisfaction with the current levy system. Tom Ironside of the British Retail Consortium emphasized the need for meaningful reform to introduce greater flexibility in fund utilization.
Stephen Phipson of Make UK echoed calls for a skills revolution, stressing the importance of employer-driven reforms to the apprentice levy. He highlighted a concerning 42% drop in apprenticeship starts in engineering since 2017.
Corin Crane of the Coventry & Warwickshire Chamber of Commerce cited challenges in recruiting apprentices, attributing it partly to economic uncertainties and low apprentice pay rates. Official statistics reflect a decline in apprentice numbers since 2015, although completion rates have increased.
Keegan defended the decline, attributing it to efforts to improve apprenticeship quality and eliminate abuses of the system. She emphasized the government’s commitment to maintaining high standards in apprenticeship programs, considering them a cornerstone of the UK’s workforce development.