Small employers warn that ‘exhausted funds’ threaten the future of the apprenticeship system

The Federation of Small Businesses has chosen GCSE results day to call on the new Secretary of State, Gavin Williamson, to take urgent action to increase apprenticeship funding.

Their chief executive, Mike Cherry, points out that some students picking up their results today will now want to start an apprenticeship. But, he claims, their choices will be restricted as apprenticeship funding becomes increasingly scarce for small employers.

FE Week was first to report overall levy budget concerns, being shared privately by the Institute for Apprenticeships last December.

The biggest challenge attached to engaging with apprenticeships is the recruitment of an apprentice

The forecast of an overspend in 2020 was subsequently acknowledged by the National Audit Office and then during a Select Committee hearing by the top civil servant at the Department for Education.

Cherry said: “There are serious concerns about the likely exhaustion of the levy budget and the consequences for non-levy paying employers. Which is why the forthcoming spending review is crucial to ensuring that funds are replenished.”

“The new secretary of state must also do more to reduce the upfront costs attached to the recruitment of apprentices. Our research shows the biggest challenge attached to engaging with apprenticeships is the recruitment of an apprentice, with 42 per cent of smaller businesses with apprentices struggling with this.”

Employers with an annual pay bill below £3 million don’t pay the apprenticeship levy and they rely on funding being available from a limited pot set aside by the Department for Education.

The shortage will quickly become much worse unless the government delivers quickly on Boris Johnson’s funding promise

This latest intervention from the FSB will add further pressure on the Treasury and Department for Education to find more funding, following a recent survey of apprenticeship providers conducted by AELP and reported by FE Week, which found three quarters were running out of cash for small employers.

AELP chief executive Mark Dawe said at the time that “The clear message from apprenticeship providers is the shortage will quickly become much worse unless the government delivers quickly on Boris Johnson’s funding promise.”

Responding to the FSB demands a Department for Education spokesperson told FE Week: “Large businesses can now transfer up to 25% of their levy funds to smaller employers so they can invest in high-quality apprenticeship training for their staff. To help smaller employers manage their own apprenticeships more effectively, we are also bringing them onto the digital apprenticeship service from November.

“However, we are aware of the concerns raised by the FSB, which is why we asked the National Apprenticeship Service to work with the FSB to support smaller employers to recruit apprentices. We are also continuing to look carefully at the future priorities for the apprenticeship programme.”