Four trade bodies, which together represent industries employing over ten million workers in the UK, are calling for urgent reform to the Apprenticeship Levy system.
So far, £3.5b of levy funds have expired under the use-it-or-lose-it scheme, because businesses were unable to meet the restrictive requirements they must meet to draw on the funds they have paid in, states the alliance.
In a letter sent to the Government, the British Retail Consortium (BRC), UKHospitality, techUK, and the Recruitment & Employment Confederation (REC), say the Government is “holding back investment” in critical training that is vital to train the future workforce, provide better wages, increase productivity, and boost economic growth.
The letter comes as UK job vacancies soar to +40% on pre-pandemic levels, and the economy’s growth prospects shrink.
The current Apprenticeship Levy system requires businesses to contribute hundreds of millions of pounds into a pot, but it only allows these funds to be spent in a restricted way. For example, businesses cannot use the money to fund any courses that are shorter than one year in duration. As a result, £3.5b of potential investment into the UK labour market has "gone to waste at a time when training is urgently needed".
The trade bodies are calling on the Government to widen the Apprenticeship Levy into a broader Skills Levy to allow businesses to spend their funds on a wider range of high-quality, accredited courses including shorter, more targeted courses, or more tailored upskilling programmes, including functional and digital skills.
"Crucially, these changes would not cost the Exchequer, but by unlocking that funding, businesses could invest millions more into equipping their workforces with the essential skills and training that the economy needs to grow," states the alliance.
Research last year conducted by the BRC revealed that retailers could create thousands of new apprenticeships if the system was reformed.
Helen Dickinson OBE, chief executive of the BRC, says: “The Government must urgently fix this £3.5b mistake, or it risks letting the UK’s anaemic productivity trail further behind its international counterparts. Retailers want to invest more in training a higher-skilled, more productive and better-paid workforce. They want to create more opportunities for people up and down the country. They want to contribute more to growth. But the broken apprenticeship system is a ball and chain around their efforts. Without reforms to the levy, retail will not be able to turbo-boost equipping its workforce for the future.”
Julian David, chief executive of of techUK, adds: “National Apprenticeship Week serves as a reminder of the work and support apprenticeships and the levy provide for businesses of all sizes. Apprenticeships should be at the heart of the strategy to level-up skills across the UK, but there is more we can do to enable businesses to reach, attract and retain diverse talent, and prepare them with the skills they need. There is a real need to continue to support young people and new entrants into the workforce using apprenticeships, but also to support those in the existing workforce to progress and acquire the skills they need for the future of work. The key to this will be to reform the apprenticeship levy to make it flexible and fit for purpose.”