Apprenticeship levy to help smaller firms

Newsletter issue - November 2018.

In a bid to make apprenticeship schemes more accessible, the Treasury has raised the amount of the apprentice levy that larger companies can transfer to smaller firms in their supply chain from 10% to 25%.

The change, which was announced by Chancellor Phillip Hammond at the Conservative Party conference, aims to provide additional flexibility for businesses so they can take full advantage of the benefits of employing apprentices, and to help as many people as possible find the right training to equip them for the new economy.

An extra £90 million of government funding will enable employers to invest a quarter of their apprenticeship funds on people working for businesses in their supply chain - boosting the number able to benefit from high-quality apprenticeship training.

A further £5 million has also been allocated to the Institute for Apprenticeships to introduce new standards and update existing ones, so that more courses can be offered - meaning more choice for those considering their training options. The old frameworks are to be discontinued so that all new apprenticeships will be on the same higher-quality standards by the start of the 2020/21 academic year.

In the coming weeks, the government will set out a process to seek views on the operation of the levy after 2020 to ensure it supports the development of the skilled workforce businesses need for the new economy.

The reforms have, however, met with some criticism from business leaders with the British Chambers of Commerce (BCC). Commenting on the Chancellor's announcements, Dr Adam Marshall, Director General of the BCC said that the review 'must introduce greater flexibility to the apprenticeship system, to ensure that businesses of all sizes can find and train the workforce they need'.

Dr Marshall went on to say that whilst the move to large firms to transfer unused levy funds down to smaller firms in their supply chain is positive, the government should go even further in the long-term, and allow levy-payers to transfer 50% of their funds, so that more companies in complex supply chains can train their people and boost productivity.

The BCC believes that the government also needs to urgently address the issues faced by smaller firms, not just by the bigger levy-payers. Dr Marshall stated that SMEs may not be paying the levy, but they have faced higher recruitment costs and great difficulty accessing the right training in recent months. He said that "ending the 10% co-investment that SMEs now have to pay would encourage more firms to take on and train new talent."