David Smith took charge of England’s largest apprenticeship provider at a time of financial and quality trouble last year. Here, he discusses Lifetime Training’s recovery journey, gives his take on outdated funding rules and reveals how the new Labour government is driving companies like his to explore alternative training markets

Chief executive David Smith is billed on Lifetime Training’s website as a “dynamic and visionary leader”. And who could argue when you see his employment track record and the turnaround task he’s currently leading.

Smith took over the country’s biggest apprenticeship provider in July 2023 at a tumultuous time: Ofsted had downgraded the firm to ‘requires improvement’, it was subject to an Education and Skills Funding Agency audit and had just been sold by private equity owners to lenders.

Fast-forward one year, and Lifetime Training has been returned to a ‘good’ judgment from the inspectorate, cleared £100 million worth of debt and almost put its funding dispute to bed.

Smith’s appointment was not by chance. He was headhunted as an experienced troubleshooter amid a series of leadership changes at Lifetime.

The Birmingham-born accountant has worked at Deloitte, Mercury Communications – the telecoms challenger to BT in the 1980s and 90s – played a key role in Parcelforce Worldwide’s turnaround in the 2000s, and held leadership positions at Royal Mail, City Link and most recently estates management company Bellrock Group.

He was also managing director at the Post Office for six months in 2010, a position that led to him giving evidence to the current public inquiry into the Horizon IT debacle earlier this year – a story dramatised in ITV show Mr Bates vs The Post Office. 

Smith, himself the grandson of a postmistress, said his “sympathies and heart are with those affected” and while he supports where he can, there is “very little at a practical level I can get involved in”.

Almost all the companies Smith has worked in, which span around seven sectors, have been in the business services space. This experience involved working with apprentices from an employer’s perspective.

Aside from the top job at Lifetime Training being a challenging role for an ambitious person, it was these encounters that attracted him to the skills training arena.

Repositioning, stabilising, turning around

He said: “I got quite a strong desire to work with individuals and apprentices who had not had the best start in life, and watch them grow and develop in their careers. Having done that from the side of large employers, I could see things that work well and things that worked a bit less well and thought it would be good to work on the other side of the fence. 

“But if you look at what I’ve done in all those businesses, it has largely been around repositioning, stabilising, turning around. When I got to Lifetime, it had been through some pretty tough times with Covid particularly. And so I came in when the new owners, Alcentra, came in to basically put it back on an even keel.”

With a mandate to secure long-term sustainability, Smith restructured Lifetime, including by reducing its 1,000-strong workforce by around 5 per cent.

Latest accounts for the training firm show after-tax losses increased from £9.2 million to £21.1 million during the 18 months to July 2023. The company had made a profit of £6.9 million in the year ended July 2020.

A major restructuring of the group’s balance sheet took place in July this year – the same month that Ofsted upgraded the provider to ‘good’ – which involved Alcentra effectively waiving £100 million of debt that was racked up under previous private equity owner Silverfleet Capital.

Smith said this action could be viewed as £100 million being invested into the skills sector and will place Lifetime in a much better position to bid for procurement contracts going forward.

The company’s next set of accounts is expected to show its current negative EBITDA (earnings before interest, taxes, depreciation, and amortisation) turning modestly positive, with Smith adding, “we’re back in a stable period financially”.

Training expansion

His reference to future bidding opportunities hints at an expansion from Lifetime’s focus on apprenticeship training.

Smith admits this is the next stage – steering the company towards more commercial training and other potential opportunities such as skills bootcamps and the adult education budget, not least because of Labour’s plans to turn the apprenticeship levy into a growth and skills levy which can fund non-apprenticeship training.

He said: “It’s great that we have secured ourselves both financially and in terms of quality, but what does the business now want to do in this bright new world of the Labour government and AI technology opportunities?

“We’re just now embarking on looking at other areas for the business. We will certainly be starting to build out our commercial offer this year. We’ll be looking with interest at how combined authority funding and the shorter course content are going to work. I would be surprised if, in a year’s time, we haven’t done something in that space as well.”

Lifetime Training has recruited more apprentices than any other provider in the country for several years, delivering to big-name employers including the NHS, KFC, McDonald’s, JD Wetherspoon, B&Q and David Lloyd, as well as the civil service.

Most apprenticeships for Lifetime are in hospitality and care, two of the areas most impacted by Covid. Starts at the provider hit 23,000 in 2018/19 but dived to 13,000 in 2020/21. Those numbers have recovered to almost 17,000 in the past two years – a level that Smith expects to maintain from now on.

He claimed that since the general election was announced, some employers had put apprenticeship opportunities on hold while they wait and see what Labour allows to be funded through its reformed levy.

While awaiting the details, Smith anticipates Lifetime will move into potential growth areas such as digital skills, wellness and wellbeing, general management training and the green agenda.

“If it’s funded through the levy then tick, we can do it that way, or if it’s funded through mayoral authorities, well, we can potentially do it that way. And if it’s not funded through either of those then we’ll look at a commercial solution,” he said.

“What is clear is the demand for those skills, regardless of which way it’s ultimately going to get funded. We can consider a very strong and positive future direction for that.”

‘Don’t just stop training your staff’

Smith urged Labour to be “careful about the speed of change” and ensure plans are properly thought through and consulted on – unlike the party’s “unintended” message in opposition which came across as allowing employers to spend up to 50 per cent of their levy on whatever training they liked.

He is “generally supportive” of Labour’s aspiration, but it “certainly has caused a schism in the marketplace” he said, adding, “we’re seeing much lower levels of apprentice take-up over the last six months across the sector so a clearer, slower, better-signposted journey is required that we can all jump on board with.

“What providers are having to do is not place any large bets in one direction. So, we’re building out more modular, more flexible curriculums.

“But our message to our customers is ‘nothing is going to change very much over the next 18 months. So please don’t just stop training your staff’.”

Smith is “encouraged” the government is putting more responsibility “under one banner” by closing the Institute for Apprenticeships and Technical Education and ESFA, and launching Skills England.

But there are “fundamentals” he says the government and its new quango must address alongside levy reform: simplification of funding rules including those that are “past their sell-by date” like the block on non-EU enrolments, and the prerequisite for apprentices to pass functional skills.

He praises the government, however, for starting strong with last week’s announcement that it will remove the 12-month minimum duration rule for some (but currently unknown) apprenticeships in the future.

Policy ‘needs to catch up with the real world’

The most “fundamental thing” for Smith, however, is that the funding model for apprenticeships has not evolved since the Conservatives’ levy reforms.

“You get the same amount of money for a hospitality course now as you would have done in 2017, but the cost base hasn’t stayed the same, and the asks from the regulatory bodies and their various guises have increased,” he said. 

“We do more around careers advice and safeguarding, for example, than we would have done in 2017, and so fundamentally, as a sector, there is a real financial stretch that has resulted in a number of competitors disappearing financially because they can’t make ends meet. And even at the size and scale that Lifetime is at, it’s very difficult, even with the economies of scale that we can bring to the model, to say that this is easily sustainable.”

Lifetime had to repay over £5 million to the ESFA recently following a historic audit into the provider’s additional learning support claims. Smith said this is another area where government should clarify the evidence that is required, adding that smaller providers would find it “difficult” to stay afloat if the same happened to them.

One of the CEO’s biggest concerns is the “opaqueness” of what qualifies as off-the-job training, as well as the rule’s application in certain sectors like hospitality where “they simply don’t have 20 per cent of their time free on the rota for them to be able to do off-the-job work”.

Smith also outlined employer and provider frustration with government rules that prevent non-EU citizens from doing apprenticeships.

He said: “The rules around who’s eligible and who’s not eligible to take the course were built in a world when we were inside the EU. We’re now sitting here with more of our workforce coming from outside the EU than we had before, but they’re not eligible.

“We have a big provision in the care sector with employers like HC-One, for example. Between 30 and 50 per cent of their staff nominations for an apprenticeship are ineligible for an apprenticeship.

“Those are the sorts of things where policy needs to catch up with the real world.”

A training provider had its national adult education budget (AEB) contract scrapped after falling foul of the Department for Education over poor apprenticeship achievement rates, its owner has claimed.

Officials also allegedly withheld AEB payments from the provider to recover a “significant” apprenticeship clawback.

Sapphire Logistics and Consultancy, which trades as Sapphire Education and Training, delivered publicly funded training in care work until officials terminated its contracts last week.

It is believed to be a rare case where the government has used powers to terminate a provider’s AEB through the apprenticeship accountability framework.

Owner Harpal Baines claimed the DfE ended Sapphire’s apprenticeship agreement “based on low [qualification achievement rates] data for 2022/23” and following an audit which demanded “significant clawback”.

DfE statistics show that between 2020-21 and 2023-24, Sapphire, based in Dudley, West Mids, logged 80 to 180 apprenticeship starts per year, but only had “low” completers which produced a null achievement rate.

The government currently uses its apprenticeship accountability framework to assess provider performance against a range of 10 measures, including achievement and retention rates.

The framework states that providers will be classed as “at risk” if they have an overall achievement rate under 50 per cent.

Level 2 and 3 care worker apprenticeship standards have high volumes of learners but consistently low achievement rates and high dropouts. Sapphire was awarded its apprenticeships contract at the height of the Covid pandemic in April 2020.

After the provider’s apprenticeship contract was terminated, Baines alleged the DfE served notice on the company’s adult education budget contract “purely on the basis of our apprenticeship contract issue”.

Sapphire was one of only 55 private training providers to secure a national AEB contract in the government’s controversial 2023 tender. It hadn’t been inspected by Ofsted at the time it won the £448,196 deal.

Its latest accounts show the company had 13 employees including directors.

The DfE confirmed it terminated the company’s contracts but declined to comment further based on the commercially sensitive nature of the issue. A spokesperson did not respond when asked to verify or deny Baines’ account.

Under clause 42.8 of the AEB contract, the Education and Skills Funding Agency states it can terminate a contract if it has ended another contract “on fault grounds where a similar right of termination exists in this contract”.

Baines said this clause was quoted to him by the DfE and complained it had “no regard” of Sapphire’s performance under the adult education contract, which he claimed had “positive outcomes for learners”.

He added the DfE asked for a “significant clawback” of apprenticeship funding, which it obtained by withholding payments for adult education budget courses Sapphire had delivered.

Baines would not say what the clawback specifically related to.

In August 2023 Ofsted graded Sapphire as ‘requires improvement’ in its first full inspection due to “fast-paced” teaching practices that focused on the completion of assessment tasks.

A monitoring report in April this year found ‘insufficient progress’ in training delivered to the company’s 70 apprentices.

This included concerns about governance, apprentices leaving early and teaching practices.

Baines said: “Our organisation was delivering solely to the care sector and was established during Covid lockdowns.

“During this period we delivered to frontline care staff during the most difficult circumstances, most of which completed their diplomas but did not complete full apprenticeships due to the varying challenges associated to them which is why the sector as a whole has low apprenticeship achievement rates.”

After FE Week spoke to the company earlier this week its website was taken down for maintenance.