Authors: Peter Dickinson and Terence Hogarth (Warwick Institute of Employment Research)
Following the introduction of the Apprenticeship Levy in 2017 the number of apprenticeship starts declined significantly. Research undertaken at the time of the introduction of the Levy indicated that there could be an initial impact on the number of apprenticeship starts - some short-term fall-off in the number of apprentices as the new systems for taking on apprentices bedded-in.
In fact, in the period since the Levy’s introduction the number of apprenticeship starts has been consistently lower than in the period before. There has been an acceleration of pre-existing trends towards older and higher level apprentices. Whilst numbers began to recover from the low 2017 base, apprenticeship recruitment was hit further by the pandemic. A rough and ready estimate suggests that apprenticeship starts fell by around 14% as a result of COVID 19.
The key findings of this research suggest that:
Apprenticeships remain an important means through which employers meet their skills needs. However, the levy has had an impact on employer behaviour in terms of apprenticeship recruitment by type, age, and level, including:
- a reduction in apprenticeship recruitment by non-levy payers;
- an increased preference for people working towards higher level apprenticeships;
- specific barriers in particular sectors, such as, backfilling costs;
- a continuation, and potentially an acceleration, of trends in the profile of apprentices which pre-dated the reforms, including older apprentices and those who are already employed.
There is evidence that for non-levy payers, the requirement to contribute to the costs of apprenticeship training does pose a problem and a disincentive to train apprentices.
The reforms have increased levy paying employers’ financial investment in apprenticeships but also stimulated their preference to use it to train existing staff at higher levels, sometimes through converting existing training provision to apprenticeships. This may generate higher level skills, but the cost might be a lower number of apprentices, fewer trained by smaller employers, as well as fewer younger and lower-level apprenticeships.
If the available funding for apprenticeships becomes increasingly spent on higher level training by large employers, there is a need to think about how the training needs of young people at lower levels, and those in smaller firms, can be met.