For a small business owner, taking on an apprentice can feel like a leap of faith. You’re employing new talent to join you or your team, not just filling a role but investing time and money into them. An incredibly rewarding move, yes, but one that comes with its own challenges – not least the costs associated with taking on a new team member, training and paying them.
At this week’s budget, the Chancellor announced that apprenticeships will be fully funded for non-levy paying employers hiring apprentices under 25 years old – expanding it from the previous funding for under 22-year-olds. She thanked the Federation of Small Businesses (FSB) for our representation on this issue. While it’s hard to escape the idea that the Treasury is not good at the detail of apprenticeship policy, this is at least some attempt to help SMEs (small and medium sized businesses).
The Chancellor also announced she was providing £820 million over the next three years for the youth guarantee, which will help small businesses do what they do best – provide jobs in our local communities and help those who need it most get into work. Taken together, these announcements should open up more opportunities and help give the next generation the tools to build something of their own.
While this, and recent announcements introducing new foundation apprenticeships earlier this year, are positive steps, the fact remains that more needs to be done to help small employers hire apprentices. The appetite from small firms is there, but too many are currently being held back by rising labour costs. Our latest Small Business Index showed this was one of the top three barriers to growth, behind the domestic economy and the tax burden.
Measures like reintroducing a £3,000 incentive for small employers hiring an apprentice under 25, which was briefly introduced during the pandemic, would help to take away the risk associated with taking on an apprentice.
With almost half of small business employers telling us this incentive would encourage them to employ apprentices in the future, we think this would make a real difference to the number of apprenticeship starts, particularly at entry level. Sadly, starts numbers in small firms are falling and have been since the Apprenticeship Levy was introduced back in 2017. Young people are losing out on the chance to develop valuable skills and experience in small businesses, while those businesses miss out on a rich source of talent. We’d like to see the government setting targets to increase the number of apprenticeship starts in small steps year on year, to create some accountability and measure the success of any policies that are brought in.
In a practical sense, small firms say the system is confusing and fragmented, and involves a lot of admin. Time and resources are in short supply for small businesses, and most of them don’t have their own administrative or HR (human resources) team to deal with this side of taking on an apprentice. Our research found that a third of small business employers who currently have an apprentice on their books say reduced admin or paperwork would encourage them to take on more.
Providing financial incentives could help to offset this too, allowing employers a bit more freedom to get apprentices on board, make sure training is up to date and maintain contact with educational establishments and training providers.
We were hoping to see measures at this year’s budget that encourage small firms to invest and grow in their business. And while as a whole the Chancellor didn’t deliver on pro-growth, pro-business measures, this apprenticeship announcement was a positive move to open up opportunities to more young people and get more small firms into the apprenticeship system.
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