To bolster the nation’s workforce and address lingering concerns over skills shortages, Prime Minister Rishi Sunak has announced a substantial investment of £60 million into apprenticeships over the upcoming year.
Despite the pledge, HR representatives have voiced scepticism, arguing that the allocated funds may not suffice to drive a significant increase in apprenticeship uptake.
The funding, unveiled just yesterday, is slated to cover the entire cost of apprenticeships for individuals aged 21 or younger at small enterprises starting April 1, 2024.
Also, the UK government disclosed that starting April 6, 2024, companies will be able to allocate a larger portion of their unutilised apprenticeship levy funds to other businesses, increasing the percentage from 25 percent to 50 percent.
3% decline in apprenticeship commencements
Introduced in 2017, the apprenticeship levy mandates that sizable corporations contribute to the creation of apprenticeship positions. However, a study by the Chartered Institute of Personnel and Development (CIPD) revealed a concerning 31 percent decline in apprenticeship commencements in England from the levy’s inception to October 2023.
In response to the recent announcements, the government anticipates generating an extra 20,000 apprenticeships for small-scale enterprises. Furthermore, Sunak is poised to unveil reforms pertaining to the size thresholds that determine company classifications. Presently, a medium-sized enterprise is defined as having 250 employees with a maximum annual turnover of £36 million, while small businesses are capped at 50 employees with a maximum turnover of £10.2 million.
Expected to be implemented this autumn, the revised thresholds would extend SME classification to an additional 132,000 businesses.
The importance of reducing apprenticeship costs
Kate Shoesmith, Deputy Chief Executive of the Recruitment and Employment Confederation (REC), offered insights on the Prime Minister’s apprenticeship initiatives. She acknowledged the importance of reducing apprenticeship costs, particularly amid economic sluggishness and stagnant youth apprenticeship rates over the past two decades. However, Shoesmith underscored that the current measures fail to address the fundamental overhaul necessary to effectively address labour shortages.
Shoesmith emphasised the rigidity of the apprenticeship levy, which restricts funding access to individuals employed by the same entity for at least a year—equivalent to the duration of an apprenticeship. She estimated that out of the one million temporary workers engaged daily in the UK, roughly 960,000 are ineligible for levy funding. To rectify this, Shoesmith advocated for levy reforms enabling funding for modular and shorter courses, a move she believes would catalyse business growth and enhance productivity during a pivotal juncture for the economy.
As the nation grapples with workforce challenges, the effectiveness of these apprenticeship initiatives remains under scrutiny, with stakeholders urging comprehensive reforms to unlock the full potential of apprenticeships in driving economic prosperity.
