Employers failing to use apprenticeship levy funds a year since introduction

More than £1bn in apprenticeship funding available through the apprenticeship levy has not been used – and employers have just one year left to spend it.

According to the Open University, only £108m of the money available through the collection of the apprenticeship levy, which came into force on 6 April 2017, has been withdrawn. This is despite around £1.39bn being available to fund apprenticeship programmes.

Any unused funding will be absorbed by the current system after two years, so employers have until April 2019 to utilise it.

Apprenticeship take-up since the levy was introduced has been low. The latest available figures show that 16,700 people started an apprenticeship in December 2017, compared to 21,600 in 2016. Around 6,200 of these were supported by apprenticeship levy funding.

David Willett, corporate director at the Open University, said the current system needs to be rethought to enable employers to make better use of the money available.

“The one-size-fits-all approach to these standards does not afford the flexibility to tailor apprenticeships to different sectors, business models or business sizes, and this needs to be addressed in order to provide organisations with better value and return on investment.

“It’s crucial that we smooth out the creases in the current system and, in doing so, pave the way for apprenticeships that can strengthen organisations across the UK,” he said.

The Open University’s ‘The apprenticeship levy: one year on’ report claimed that the levy has generated £1.8m from 50,000 organisations since it began last year.

Under the scheme, employers with a payroll of £3m or more are required to pay 0.5% of their annual pay bill, and will be able to draw-down up to £15,000 to use against the cost of employing an apprentice.

Although 92% of levy-paying organisations agreed with the apprenticeship levy in principle, the report said, 43% would like it to be changed to remove the barriers that deter some employers from using it.

Three in 10 that had accessed the funding said the process was more time consuming than they expected, while 19% said it was complicated.

The Open University said the Education and Skills Funding Agency’s 20% off-the-job learning requirement was problematic for many organisations, as it takes staff away from their day-to-day duties for too long.

It called for the introduction of “modular apprenticeships” to allow employers to tailor programmes to their requirements by adding additional modules onto “core” apprenticeships. Almost a quarter (24%) of employers supported this.

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Employers are now able to transfer 10% of their apprenticeship funds to another, non-levy-paying organisation if they do not intend to use them. But Neil Carberry, managing director of the CBI, said this was “simply not enough”.

“Companies should be able to draw down far more from the levy pot – up to 50%. This will help firms to work with others to create centres of excellence for apprenticeship training and improve access to apprenticeships for smaller firms,” he explained.