How can apprenticeships support the economy?
The current apprenticeship system is not optimised to meet the needs of employers or the wider economy. Employers have come to view the apprenticeship system as overly complex. The 2018 CBI and Pearson Skills survey found that 59% of respondents experienced difficulty in recruiting apprentices.
The recently published report on apprenticeships by the National Audit Office demonstrates the precarious position of our apprenticeship system. The report shows that while DfE has improved its performance measures there is little transparency in how it demonstrates the impact of the programme on economic productivity.
Apprenticeships could be a key means to drive productivity but as the report highlights, apprenticeship starts have dropped by 26% between 2015/16 and 2017/18.
The reputation and perception of apprenticeships has arguably improved since the introduction of the apprenticeship levy, but there is clearly still much more work to do. There are several areas where apprenticeships can be used to drive productivity and economic growth.
Apprenticeships can play a key role in delivering highly skilled talent into the workforce and creating a genuine alternative to the university route. But to see apprenticeships really benefit individuals and the wider economy, we need to:
- Enhance SME engagement and access,
- Reduce complexity within the system, and
- Create a better balance between higher and intermediate apprenticeships
1. Enhance SME Engagement and Access
Firstly, much more needs to be done to encourage small and medium sized businesses to engage in the apprenticeship system. The announcement by the chancellor that the co-investment rate will fall from 10% to 5% is surely welcome news. But with reports that the levy budget is due to be overspent, there is a risk that the non-levy pot is getting smaller.
We have heard from several of our colleges that their non levy allocations have either been reduced or grown marginally when compared to the previous year.
Small and medium size business represent the overwhelming majority of employers in the UK, but they have not been supported adequately to think about how they can use apprenticeships to get new talent into their business.
2. Reduce Complexity
To optimise the funds used by employers, we need greater flexibility in the system.
A major concern from levy payers is that the funds get clawed back once they reach the end of the 24-month period they must spend their levy funds. Some employers might want to spend their levy funds, but the system restricts them.
In some cases, the employer might not have enough time to set up a programme or the relevant standards are not approved. In this case, it should be reasonable that there is a process that enables employers to appeal for a 12-month extension to retain funds.
3. Balance Higher and Intermediate Apprenticeships
More also needs to be done to ensure that the apprenticeship system is promoting apprenticeship at different levels. Since the introduction of the levy we have seen a huge decrease in the number of intermediate apprenticeships starts, but conversely a huge rise in the number of higher-level apprenticeships starts.
We therefore need a policy that promotes a more balanced system. Currently the system does not discriminate between a young person looking to use an apprenticeship to get their start on the career ladder, and a senior executive that is studying for an executive MBA apprenticeship.
For the long-term success of the UK economy: Make Apprenticeships Work for All
Britain is going through significant change and disruption. Industries are rapidly changing, automatisation is becoming increasingly common and it’s difficult to predict what Brexit will do to jobs and the UK economy. At the same time, we suffer from profound skills shortages in key industries and lagging productivity levels.
A highly skilled and adaptable workforce with technical capacity can be a solution to those challenges as it ensures that the demand for skills is met. However, our current system can be greatly improved. In our "Making Apprenticeships Work for All" publication, we focus on the areas that need to change to ensure that the UK has a skilled workforce that can compete on the global stage.
Cultural issues and stigmas
The first area of focus is around cultural issues and the stigmatisation that surrounds apprenticeships. A 2017 student survey found that 68% of respondents believed that there was a stigma attached to apprenticeship. This is one of the reasons why only a small proportion of school leavers enter apprenticeships with only 30% taking the vocational route.
Apprenticeships should be an option available to everyone, but we are let down by a careers and guidance system that does not inform learners of the apprenticeship. To encourage more people to undertake apprenticeships, we need a compelling story to tell about how apprenticeships can improve careers and life prospects.
Secondly, we suggest some adjustments to the apprenticeship system to make it work better for employers and the wider economy. In the first year of the levy, employers used a mere 8% of the £1.39 billion they paid into the pot, which reflects on some structural issues of the system. We think that there needs to be more flexibility in the way employers can use the levy.
Finally, we looked at how to embed quality in the system and ensure that we focus on outcomes, not inputs. We also advocate for the adoption of a regulatory framework to ensure quality at all levels and promoting good behaviour among providers. In order to change the perception of apprenticeships, we need to sell a reliable quality product.
In this paper, we have set out some of the key areas that we think need further reform. There are many more areas that we could have touched on, but we feel that the issues presented here are the most pressing.
We need to work together, collaborate and press for the small changes that would make so much difference in the apprenticeship system. Apprenticeships will play a crucial role in delivering a credible and respected system of technical education, and Collab Group colleges want to help lead the transformation. We see these areas as being vital to the success of apprenticeships and the long-term success of the UK economy.
Ian Pretty, CEO, Collab Group