13 Feb, 2018 / BY Jessica Plank

Can the apprenticeship levy address the UK manufacturing skills gap?

In November 2017, the UK’s Department for Education hosted its first ever Skills Summit which brought together top UK employers and education experts to collaborate on how to best deliver skills reform and address the skills gap.  

Sitting front and centre at the conference was a renewed commitment to the benefits of apprenticeship schemes - structured programmes of on-the-job training that provide trainees with practical hands-on experience combined with the opportunity to pursue relevant formal qualifications.  

According to the Education and Skills Funding Agency website, there were a record 491,300 new apprenticeships in the UK, in the 2016-2017 academic year, of which 74,000 were new starts within the engineering and manufacturing sectors, and 1670 were degree level apprenticeships including foundation degrees, HNDs and full honours degrees.

Tailored apprenticeship schemes offer a host of benefits for manufacturers, enabling companies to match the structure and content of their training to the unique needs of their business, which in turn leads to improved productivity, a reduction in staff turnover and greater staff loyalty.

A recent survey of UK employers reveals that 87% are happy with their apprenticeship programme, 76% report improvements in productivity and 75% feel that the scheme has improved the quality of their product or service. Apprenticeships are also fairly evenly split between smaller and larger employers, with smaller businesses (0-49 employees), accounting for 44% of total apprenticeship participation and larger businesses (250+ employees) accounting for 41%.

For manufacturing companies that fall within the category of SMEs (small to medium enterprises with 250 employees or less or an annual turnover of £50 million or below) there is also substantial financial support for apprenticeships.

Depending on the personal circumstances of the apprentice, SMEs can receive up to 90% of the training and assessment costs for the lifetime of the apprenticeship. Businesses with 50 employees or less can receive up up 100% of the training and assessment costs if they take on apprentices aged 16-18. And further support is also available for companies who take on apprentices who have been in care or who have special learning needs.

From an employer perspective, 87% of employers said they were satisfied with the programme, 76% reported an improvement in productivity and three quarters said that the introduction of apprenticeships had improved their product or service.

The apprenticeship levy

As of April 2017 larger UK employers are required to pay into the apprenticeship levy, a funding system collected by the HMRC via PAYE returns, which has been set up to increase businesses’ control over apprenticeship training and to enhance the quality and quantity of available apprenticeships.  The levy aims to raise up to £3 billion by 2020 to fund three million new apprenticeships.

Currently the levy applies to businesses with an annual payroll of £3 million and above (equating to 0.5% of the company’s payroll) and offset by a £15,000 annual allowance. For each £1 that an employer contributes the government then tops up with a further £2 (up to the maximum level of funding available for that apprenticeship.)

Businesses that pay the levy can access their contribution via an online digital apprenticeship service account which is used to fund the training and assessment of apprentices in England.  All funds that go into the digital account also benefit from a government top-up of 10%.

Smaller businesses that aren’t subject to the levy are still able to access the digital apprenticeship service through a “co-investment” service where they pay 10% towards the cost of apprenticeship training with the government paying the remaining 90% (or up to the funding band maximum.)

Employers looking to find apprentices can log into the apprenticeship service where they can access levy funds, manage their apprentices and pay their training providers. There is also a Find Apprenticeship Training service where companies can search by job role or keyword to select an approved apprenticeship standard or framework.

Apprenticeship schemes can provide invaluable learning opportunities and career prospects for apprentices.  Research from the Education and Skills Funding website also reports that over 90% of apprentices go on into work or further training, 92% say that their apprenticeship has improved their job prospects and 97% believe it has enhanced their ability to do their job. Higher apprentices can also earn an average of £150,000 more over their lifetime in comparison to those with level 3 vocational qualifications.

But just as significantly too, apprenticeship schemes provide a host of benefits for employers - enabling them to nurture the right skills for industry, increase staff retention, boost productivity and increase profitability.

Written by Jessica Plank

Based in Switzerland, Jessica holds a Bachelor's degree in Business Administration and has day-to-day responsibility for strategic marketing tactics including blog management, social media marketing, e-mail marketing, and European event management. Jessica’s dedication to maintaining a strong online presence has significantly contributed to the success of ESCATEC's marketing initiatives since she joined the team in 2021.