Apprenticeship providers turning away up to 40,000 small employers due to levy shortage

Training providers are “having to turn their backs” on up to 40,000 small businesses due to the shortfall in apprenticeship levy funds.

According to the Association of Employment and Learning Providers (AELP), two-fifths of 135 apprenticeship providers surveyed are having to reject small-to-medium sized enterprises (SMEs) looking to recruit apprentices.

Recognising the problems, the government yesterday announced small employers would be let on to the digital apprenticeship service to access funding. Until now, this had been open only to levy-payers.

However, owing to the affordability issues, SMEs will be capped at just three starts each.

One unnamed provider in AELP’s survey reported: “We are having to turn our backs on small and micro businesses who have supported apprenticeships for many years, because we do not have funding available.”

29 per cent of providers have “significantly reduced” recruitment

More than half of the non-levy providers surveyed said their funding allocation was not sufficient to cover both the cost of existing apprentices and of new starts from an SME.

One calculates it will have used up its allocation by February, leaving two months in which it will have no funding.

Five providers said they were going to close their business as a result of the funding shortfall.

According to the AELP, the proportion of training providers with a non-levy contract which have actually stopped recruitment of apprentices for smaller employers has reached 31 per cent.

Another 29 per cent have “significantly reduced” recruitment.

Over half of providers are now focusing more on delivering apprenticeships for levy-paying employers, as respondents with a non-levy contract said they were unable to meet demand from an average of 59 SMEs.

AELP calculates that if this was extrapolated to cover the nearly 700 providers which have had a non-levy contract since April 2017, anything up to 40,000 SMEs could be adversely affected by the shortfall.

The association has reiterated their call for the restoration of the £1.5 billion apprenticeship budget available to SMEs before the levy was introduced.

Chief executive Mark Dawe (pictured) called it “totally unacceptable” for both small businesses and young people that so many of them can’t start apprenticeships “because of failures in how the levy funding system works”.

SMEs do not pay the apprenticeship levy and rely on funding being left over from it for their programmes after levy-paying employers have first taken back their entitlement.

In August 2019, the results from a previous AELP survey of providers revealed that three-quarters could not meet SME demand due to levy shortages.

This came after FE Week broke the news last February that providers were turning away apprentices from small businesses.

But these shortages, and their impact, have not escaped the attention of the government: in 2018, the Institute for Apprenticeships and Technical Education reported the apprenticeships budget could be overspent by £1.5 billion by 2021/22.

And the National Audit Office warned last March that there was a “clear risk” the apprenticeship programme was not financially sustainable after the average cost of training hit double the government’s predictions.

Even the Department for Education’s permanent secretary has admitted to the Public Accounts Committee that “hard choices” had to be made to avoid the apprenticeships budget going into the red.

The government has invested millions in a ‘Fire It Up’ advertising campaign to drum up support for apprenticeships, but according to one provider in the AELP report: “Employers fail to understand why the government ran an apprenticeship advertising campaign when a business’s preferred training provider has insufficient funding.”

The campaign was launched with a blaze of publicity in 2019 and backed with £2.5 million, with then-education secretary Damian Hinds saying its aim was to “shift deeply held views and drive more people towards an apprenticeship”.

A Department for Education spokesperson said they have increased investment in apprenticeships to over £2.5 billion, double what was spent in 2010-11 in cash terms.

“To support smaller employers to take advantage of the benefits apprentices can bring to their business, from this week, we are making funding available for up to 15,000 additional apprenticeship starts and giving smaller employers access to training through our digital apprenticeship service.”