Apprenticeships: many FE organisations see the levy as a risk

Nearly a fifth of all risks centre around government policy for further education organisations, with apprenticeship funding coming out as a common risk, reveals RSM.

After analysing over 100 risk registers* covering a range of general further education colleges (GFEs), sixth form colleges and specialist colleges; the apprenticeship levy remains a key concern for the sector.  

Since the last survey in 2016, the new apprenticeship levy has been introduced which has fundamentally changed how apprenticeship schemes are funded. One year on, and the apprenticeship training landscape is increasingly complex with some apprentices still being completed under the old regime, along with provision under both the levy and non-levy, and a system which the government is continually reviewing; which explains why many FE organisations see the levy as a risk.

In addition, most further education colleges are also payers of the levy which, along with factors such as increasing pension contributions and the potential indirect impact of lifting the public sector pay cap, is putting more pressure on organisations, particularly achieving the sector target of staff costs to income benchmark.

With more competition for funding, FE organisations will be more dependent on increasing student numbers, which is concerning as risk around recruitment, and retention, of both students and staff remain a key concern for the sector, coming second only to commercial and operational issues at almost 19 per cent, up from 17 per cent in 2016.

Dominic Blythe, Director and FE specialist, said:

‘For a few colleges, the ability to meet their student number targets in the short term is critical to their viability, with some making the clear link to cash flows and financial stability. Worryingly only a small number link this to the inability to meet the requirements of employers which is a major risk for some given the shift of control to employers following the introduction of the apprenticeship levy.

‘With many colleges failing to deliver against their Adult Education Budget, and several seeing an adverse impact on income following the extension of advanced learner loans, apprenticeships are a key area for potential growth for many GFEs. The most recent data released by the Department of Education indicates that there has been a drop in apprenticeship starts of nearly 40 per cent year on year since the introduction of the levy. Many factors will be contributing to this, including that employers have two years to use their levy funds which presents a real opportunity as more employers may seek to utilise the levy this year. Also, FE organisations shouldn’t lose sight of the fact that the government is still providing 90 per cent funding for non-levy payers and that there are further incentives, for example, with regard to delivery to 16-18 year olds.

‘Whilst the apprenticeship regime is complex and still developing, there remains significant scope for FE organisations to focus more heavily on the opportunities that the apprenticeship levy brings rather than the challenges.’

*RSM’s analysis, which is predominantly aimed at governors and senior management, is based on over 100 risk registers and covers a range of general further education colleges (GFEs), sixth form colleges and specialist colleges.  We include comparison to the position in 2016 to help highlight the changing landscape and identify other areas that colleges may want to be considering.