The skills sectors’ response to the removal of the apprenticeship ‘cap of ten’ for small businesses

First Intuition is delighted to hear that from 3 April 2023, the government has removed the ‘cap on ten’ non-levy reservations for apprenticeships.

Apprenticeships are a key facilitator of social mobility for young adults who want to start successful careers in sectors such as accountancy and finance.

When non-levy employers (those with annual payroll bills below £3m) were initially moved onto the Apprenticeship Service they were limited to reserving funding for just 3 apprentices at any given point in time. Thankfully this cap was soon increased to 10 learners but many SME’s still quickly reached that limit. Due to pressure from the sector, all non-levy reservation levels were reset to nil on 1 April 2021, and then again on 1 June 2022, allowing non-levy employers to continue recruiting and starting apprentices.

In recent weeks, however, an increasing number of SME’s were again hitting their cap of ten with no clarity about whether there would be a further reset.

Gareth John, Director with First Intuition, met Robert Halfon MP, the Minister for Skills, Apprenticeships and Higher Education at Harlow College on 10 February to lay out some of the issues that the reservation cap was causing for increasing numbers of non-levy employers.

Gareth told the Minister that “for SME’s, the backbone of our regional economies and significant employers of young adults in economically deprived areas, the lack of clarity over when or whether the non-levy reservations cap will be reset is proving a significant challenge to their ability to plan apprenticeship starts at this time when they desperately need more talent to allow their businesses to grow.”

In a letter to the apprenticeship sector last week, Robert Halfon announced that the government recognise the importance of smaller employers and the role they play in creating apprenticeship opportunities, and as a result want to ensure smaller employers have the access to the apprenticeships they need. That’s why small employers who do not pay the levy will no longer be limited to a maximum of 10 new apprenticeship starts – they will be able to recruit as many high-quality apprentices as their business needs.

Gareth comments, “This is excellent news for the many SME’s who are desperate to recruit apprentices at this time of acute labour shortages, allowing them to help drive the growth that the economy so badly needs. Scrapping the non-levy cap will maximise the career opportunities offered to young adults and ensure that as many of them as possible get the strong start to their careers that they deserve. Well done to Rob Halfon MP and the DfE for listening to the voices across the skills sector who were calling for this, and for responding in such a supportive way.”  

Other key voices from across the skills sector also comment on the change and what it means to them:

Simon Ashworth, Director of Policy at the Association of Employment and Learning Providers (AELP) told Gareth

“We’re absolutely delighted that the ‘cap of ten’ non-levy reservations will be abolished from April. Each year this causes big issues for numerous smaller employers who wish to take on more apprentices and there is always a lack of transparency over whether the cap will be reset or not. This then leads to employers being unable to plan for the future effectively.”

Robert West, Head of Education & Skills at the CBI says

“Many SMEs will welcome the scrapping of the ‘cap of ten’ non-levy reservations. Removing it makes the scheme more responsive to small businesses wishing to use apprenticeships to better address the skills challenges that they face.”

Alex Hall-Chen, Principal Policy Advisor at the Institute of Directors commented to Gareth that the scrapping of the non-levy cap is “a no-brainer…definitely positive news. Any non-levy payers not able to recruit as many apprentices as they want is too many.”

Gemma Gathercole, Strategic Engagement Lead at ACCA says

“ACCA welcomes the government announcement on lifting the cap for non-levy employer apprenticeship starts. The cap presented a significant barrier for non-levy employers wanting to engage in the apprenticeship system, particularly SMEs. Serving as both a barrier to entry for those who hadn’t engaged with the complexity of the system and a barrier to growth for those using apprenticeships to recruit and develop teams. We encourage the government to continue to remove barriers to the apprenticeships system and urge a review of funding bands to take inflation into account to maintain quality delivery.”

Alex Collins, Senior Manager at ICAEW, reacted by saying

“I am delighted that policymakers have listened to employers, tuition providers and professional bodies like ICAEW. Removing the cap on apprenticeships was one of six recommendations made to government in ICAEW’s recent Spring Budget Representation. Apprenticeship policy which is market-led, can deliver an essential boost to UK businesses who are struggling to recruit in many sectors, whilst also improving access to exciting professions like accountancy and finance.”

Anthony Clark, Business Development Manager at AAT says,

“This is welcome news for SME’s as we know that some have previously had to put Apprenticeship recruitment plans on hold due to cap. Removing the cap will allow SME’s to recruit and train more apprentices across all levels of the Accounting Apprenticeships and help develop the future workforce.”

Hannah Jones, Partner at Hart Shaw Chartered Accountants and Business Advisers comments that

“The reset of the apprenticeship funding AND the scrapping of the cap means we can now recruit with confidence; we know we can offer an excellent training package and environment for apprentices, and this enables us to increase the number of those opportunities.

The market is crying out for individuals with these skill sets, and it’s fantastic that we can help individuals from all different backgrounds, giving them the support they need to build long-term careers.

We are also keen to start expanding apprenticeship pathways into other areas of our business, opening up more opportunities for individuals to develop their skills and thrive.”

Katy Dorman, Apprenticeship Strategy Manager at Norfolk County Council shared with Gareth that

“We welcome the news that the non-levy cap is being removed from today. Removing this obstacle will ensure more SMEs can access the funding they need which is critical for growth and developing the necessary skills for businesses to thrive. This step towards a simplified process is appreciated and hopefully is the first of many opportunities to improve the apprenticeship landscape for smaller businesses”.

Anthony Impey MBE, Chair of the Apprenticeship Ambassador Network and CEO of Be the Business, says

“At a time that small business leaders across the country are facing so many different challenges, they need all the help they can get. So, this is especially good news and will help lots of non-levy paying businesses unlock opportunities. One business leader from the hospitality sector told me that the cap on apprenticeship numbers in any year had hampered their ability to operate in a sector that has been hit hard by skills shortages. The removal of the cap will mean that businesses like this will be able to leverage the full value of apprenticeships to drive their growth and their productivity.”