Turnaround job of a Lifetime at apprenticeship giant

An interview with CEO David Smith

Long read

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 Here, he discusses Lifetime Training’s recovery journey, gives his take on outdated funding rules and reveals how the new Labour government is driving companies like his to explore alternative training markets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.

Lifetimes latest Ofsted report

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.”

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2 Comments

  1. Robert George

    A very impressive turnaround indeed. But readers of the Directors’ Report in Lifetime’s accounts to 31 July 2023 will see the description of progress described in the article is the same as that in the Directors’ Report, i.e. made prior to David’s arrival in July 23.

  2. “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”

    If that’s the case, then they’re not really an apprentice and apprentice wages shouldn’t apply. Attempts by, typically large global, employers to side step minimum wage requirements devalues apprenticeships. It’s a policy tightrope…

    It’s not hard to foresee a future where minimum duration is shortened and staff are recycled onto a conveyor belt of short “modular” apprenticeships, where there is an incentive for businesses to take advantage of apprentice wage regulations to reduce their costs and maximise profit.

    Lets hope Labour aren’t tempted by the illusory boost that would give apprenticeship starts volumes.