Reversing the Apprenticeship Starts Decline

Long before the pandemic started earlier this year news about further education was often dominated by the year-on-year decline of Apprenticeships starts in England. In fact, the trend of decline has carried on since 2016/17 and the most recent statistics confirm a 18% year-on-year decline in 2019/20, accelerated significantly since the beginning of the pandemic in March.

Simultaneously, unemployment is on the rise, with young people feeling the greatest effects of the fall-out. As at September 2020, the rate of unemployment for economically active 16-24 year olds is now 16.4%, compared to 4.8% for the whole of the UK, both rising sharply in recent months.

Since March, the government has taken urgent and unprecedented action to protect businesses and the public from the economic fallout, by opening the public purse. Policies have been announced that place skills and employability at the heart of the economic recovery plan. However, despite the obvious best intentions evident in the actions taken, will they be effective?

Since August, employers have been incentivised to recruit new apprentices through the introduction of incremental payments to employers who take on new apprentices at month 3 and 12 of the apprenticeship, amounting to £2,000 for an apprentice aged 16-24, reducing to £1,500 for apprentices aged 25 and over.

By comparison, the Government will also invest up to £2bn in the widely promoted Kickstart scheme – paying 100% of the age-relevant National Minimum Wage, National Insurance and pension contributions for 25 hours a week over a 6-month period. In addition, employers will receive a payment of £1,500 for ‘setup costs’ at the commencement of employment. However, individuals on the Kickstart scheme cannot simultaneously start an Apprenticeship without the employer forgoing the wage subsidy.

It will take some time to understand whether these policies will have had the intended impact. However, with England plunged into another lockdown on Thursday (5 Nov) last week and several sectors no longer trading or severely restricted, it does not bode well for a rise in new apprenticeship starts to support the economic recovery as the Government may have hoped.

So, how could things be different?

What further steps can be taken to turn the tide on apprenticeship starts decline?

An international perspective

Australia

In the face of a similar economic crisis, Australia introduced the Boosting Apprenticeships Commencements scheme which provides a wage subsidy to employers worth 50% of apprentice’s wages, worth nearly £660m (AU $1.2bn). The scheme is aimed to create 100,000 new apprenticeship placements in the next 12 months from October 2020.

Following early criticism from education and business leaders that the scheme allowed employers to place existing employees onto an apprenticeship just to access the wage subsidy, the Government swiftly made changes to limit the number of existing employees apprentices to 30 per employer, with the exception of trade apprentices.

In addition, Australia took steps to protect existing apprentices and trainees by supporting small and medium size employers of up to 200 employees with a 50% wage subsidy via the Supporting Apprentices and Trainee scheme.

France

France has adopted a similar UK-style incentive for employers who recruit an apprentice before the end of February 2021, offering a grant of €5,000 for each under-18 hired and €8,000 for those aged 18-30, with all businesses eligible¹.

France experienced a rise of 16% in apprentices hired in 2019 to reach 490K, after the introduction of the apprenticeship reform adopted in the summer of 2018 that included a version of similar grants for employers taking on new apprentices.

Germany

In June the German government announced it would support companies with a subsidy of €2,000 for each apprenticeship position they maintained and €3,000 for each additional place they offered.

However, the often-revered German apprenticeship system has not been immune from decline, forecasting 9% fewer apprenticeship places by the end of the year².

An employer’s perspective

It begs the question, are financial incentives the key to promoting apprenticeship starts? We spoke to a few employers to get their views.

Graham Briggs, Head of Apprenticeships and Employability Programmes at Greene King, said:

“At Greene King we fully appreciate the value apprenticeships bring to both our business and the apprentice’s development and career opportunities.  We have always offered apprenticeships to all our employees and not focussed on the incentives – these merely allow us to re-invest and grow the programme further. 

“An extension to the recruitment period for the apprenticeship incentives would allow us to offer even more opportunities to our people and allow businesses and industries to make the most of them, if they have been unable to due to Covid.”

Matt Knibbs, Head of People and Culture at Millennium Support shared the perspective of an SME employer in the social care sector:

“Although a welcome addition, the Kickstart scheme rules are restrictive for us and SME’s overall.

“I would sooner see bigger incentives (e.g. 50% of salary paid for the duration of the learning) for job creation that utilises apprenticeships as this practical and structured way of learning is proven to deliver”

How could we do it differently in the UK?

Immediate recommendations for officials to consider supporting employers taking on apprentices include:

1. Allow individuals on the Kickstart scheme to commence an Apprenticeship, without removing the wage subsidy from the employer, providing them an opportunity to develop the skills to advance their employment and career prospects as early as possible
2. Extend the incentives for newly recruited Apprenticeship starts until the end of the academic year 2020/21 to allow employers to take advantage of the scheme when there is (hopefully) more economic optimism and less restrictions on businesses and the public.
3. Remove the barriers of co-investment for non-levy paying employers, encouraging them to take on new apprentices.

As the Government considers the White Paper for Further Education due to be published this Autumn, I urge them to consider more support for employers to take on and retain apprentices, removing barriers to levelling up across the nation in the face of one of the worst economic crisis in a decade.

Sean Cosgrove, Chief Commercial Officer at Lifetime Training Ltd