Two steps forward and one step back: or the calm before the storm?

Reacting to the reduction in Apprenticeship starts between May-July 2017

This week the government has published its regular quarterly Apprenticeship data. For the past 5 years these quarterly reports have shown a remarkably consistent picture, with very little year on year fluctuation in the number of new Apprenticeships started in England.

However the latest set of data has revealed an unprecedented 61% drop in the number of apprenticeships starts between May and July 2017, when compared to the same period last year.

This drop has obviously coincided with the introduction of the Apprenticeship Levy for employers with an annual wage bill of £3M or greater. And the introduction of compulsory training charges (the 10%) for almost all other employers.

Terminal decline or just a normal change curve

The obvious question is of course, ‘is this is a ‘blip’ or the new norm’?

Although the Levy has increased the amount of money available for Apprenticeships by 50% it has also been a very big change and is one that is taking some time to get used to.

And when politicians see the ‘60% drop’ headlines combined with the fact that there is X hundred £million lying untouched in Levy accounts – there will be a call to action.

But is it time to panic or do we just need to allow more time for the changes to take effect?

What has often happened before in FE in that poor initial results lead to hasty policy changes which then cause a rapid change from under spend to over spend (although the refusal to amend Traineeships has achieved the opposite).

Personally I hope that the minister, department, IFA and others will stay strong and allow a little more time before making any hasty decisions.

Large levy payers

We know from our work with large levy paying employers that there is a lot involved in setting up a corporate Levy funded apprenticeship scheme, especially for employers new to apprenticeships:

• there is the question of strategy and priority – where should you use the Levy – to bring in fresh new talent or to upskill existing staff – & will the positive impact of upskilling outweigh the cost of training?

• the levy has centralised L&D budgets that have typically previously been departmental. Deciding who will manage a single fund and how, can be a complex process for large organisations

• employers then need to find a training provider (or providers) to deliver on this plan. This can often involve a lengthy procurement process; it is after all important to choose a partner that can deliver the high quality learning experience your staff deserve. Corporate legal teams also need to review and agree contracts… etc.

It is no wonder then that many large levy employers were not all ready to start large scale programmes in May.

Who else might have been affected by the changes?

Marginal Levy payers

Smaller levy employers will have also felt the impact of the changes

Marginal levy payers (ie those many thousand with a levy pot of £10k PA or less) are probably wondering if the cost of administering the account is worth the return – and if there is no widespread take-up by these employers then it must sound a real warning to the Gov. re their plans to make all employers open an account…..

SME contributions

Other small employers are facing the new compulsory 10% contribution (payable by most). And although a 90% subsidy is an attractive proposition, especially when combined with (usually) free recruitment services it is still a cash sum that has to be found and will be off putting to some.

Product availability

So the demand side may well have been inhibited by the changes but what about the supply side?

The cost of developing new standards is high, and the rewards for delivering old frameworks have been lowered.

In a system where 1,000 providers now have to each develop their own products and I.P. rather than relying on Awarding Body materials, the cost of staying in the game can be prohibitive. So although there are more potential apprenticeships and apprenticeship providers than ever before, actual availability has been reduced.

At least for the time being.

Too early to draw conclusions

Our experience at Kaplan is that it is too soon to draw conclusions. Demand in Q1 of 2017/18 is still strong amongst SME apprentice employers and large employers are also now reaching the implementation phase of their plans.

There has been a fundamental change in both the Demand and the Supply sides of a market and the new norm will not be exactly the same as the old one.

But it can be just as large and just as rewarding for everyone involved.

Richard Marsh, Apprenticeship Partnership Director: Kaplan Financial