Only Half of Eligible UK Companies Using Apprenticeship Levy Funds

Only Half of Eligible UK Companies Using Apprenticeship Levy Funds

Only about half of the companies eligible to use funds from the UK’s apprentice levy, which came into effect this April, to pay for training programs have taken advantage of this option, the latest official figures show. And this is raising concerns that businesses may be “writing off the apprenticeship levy as a tax,” Emily Burt writes for People Management:

Just 10,500 apprenticeship service accounts were registered on the system at the end of August, according to the official figures, falling short of the estimated 19,150 levy-paying companies eligible to use the service. …

Elizabeth Crowley, skills adviser at the CIPD, said the government must do more to make sure employers were actively engaging with the levy: “In our view the government needs to be doing more work to ensure employers are making a choice in not using the levy, instead of being unaware of it. It is equally important that if there is an underspend, the funds are ring-fenced and used for supporting employer training, as there is a danger it could simply go back into the government’s coffer, and not be used to increase skills training and investment in the UK economy.”

Among those organizations that are using apprenticeship levy funds, many are using them in unexpected ways.

While apprenticeships are commonly thought of as learning experiences for new, younger employees, the Financial Times reports that many UK businesses are using the apprenticeship levy to send executives on MBA courses. As a result, the levy has been a surprising boon to British business schools, many of which had been struggling in the years since the financial crisis as businesses became reluctant to sponsor their employees’ MBAs (a trend that has also been seen in the US).

This seemingly unorthodox application of apprenticeship levy funds illustrates that businesses have more options than they may think for using these funds to train employees, but also reflects a common critique of the levy: That little of the money it raised would actually end up funding genuine apprenticeships. Instead, studies predicted that businesses and training providers would simply rebrand their existing programs as “apprenticeships.” Employer surveys conducted in advance of the levy coming into effect found that this was just what most organizations planned to do with their apprenticeship funds, while many others did not know what the levy was or how they could use the funds.

This lack of awareness, as the CIPD’s Crowley surmised, is likely a major factor behind the scheme’s low uptake. Another issue, despite the creative ways in which levy funds are being used, is that the government’s definition of apprenticeships for these purposes is too inflexible, requiring that 20 percent of apprentices’ training take place off the job. That means that while the executive MBA programs the Financial Times highlighted are eligible for apprenticeship levy funds, apprenticeship-style training based almost entirely on “learning by doing” may not be.