Could the Apprenticeship Levy be the answer to the UK’s diversity crisis and £63bn skills shortage?

The current skills gap costs the UK £63 billion a year, with an estimated 600,000 job vacancies in digital technology alone.

There are currently more FTSE100 companies being led by men called David and Steve, than companies led by women and ethnic minorities.

Meanwhile, we know that companies that achieve gender diversity are more profitable, solve problems faster and are more likely to be change-ready and innovative. And yet the diversity gap remains significant.

There is an urgent need to ensure a talent pipeline for the future; the impact of not doing so will continue to significantly impact the UK economy.  

Recently, we released Mind the Gap: Could apprenticeships hold the answer to the diversity crisis? – a comprehensive report that highlights how tapping into the apprenticeship pool could not only help to resolve the national skills gap, but also address the diversity and inclusion crisis.  

The diversity picture

The commercial advantages of diversity are well documented. Research shows that companies that achieve gender diversity on their executive teams are 21% more profitable than their competitors. For companies who are ethnically and culturally diverse, that number rises to 33%. They also make better, faster decisions. Along with the obvious commercial benefits, research shows that diverse workplaces are also a top priority for millennials who will comprise 75% of the workforce by 2025. 

As it currently stands, women remain significantly underrepresented at all levels of our organisations – particularly women of colour. If companies started hiring and promoting women and men to manager level at equal rates, we could get close to parity in management – 48% women versus 52% men – over the same ten years.  

Similarly, people with disabilities account for 18% of the UK workforce, but only 9% of IT specialists – even though Government estimates have shown that people with disabilities have a spending power of £250 billion. What this data indicates is not only alarming – it’s a waste of potential. 

These statistics got us thinking: if hiring is the most critical juncture of diversity, there might be a solution that could get us closer to parity. And it involves recruiting from a different avenue.  

The value of apprenticeships

Apprenticeship programmes empower organisations to find, recruit and develop people from different backgrounds, yet they remain an under-utilised business asset in plugging the diversity gap.  

Through our apprenticeships service Arch, AVADO is one of the UK’s leading providers of apprenticeships. As Chief Growth Officer I’m convinced of the role apprenticeships play in resolving the diversity crisis, but that’s not the case with all organisations. The question is, why? 

We surveyed an exclusive group of HR and learning professionals to find out what their businesses were doing to create more diverse workforces – and whether the Apprenticeship Levy is perhaps the secret solution that only the most clued-up people are discovering.  

A key benefit to organisations, emphasised in our research was the ability to access a more diverse pool of potential candidates through apprenticeships. 

Amongst other benefits mentioned was the chance to diversify away from more traditional graduate intakes, in terms of background and capability. 

Full use of the Apprenticeships Levy could help to improve the UK’s diversity crisis and the £63bn skills shortage 

The Apprenticeships Levy, a compulsory tax on employers to help fund development has already had a big impact on how organisations approach hiring and developing new talent – and on the way, they go about nurturing existing talent.  

But the Levy is yet to be used to its full potential. Two-thirds of the business leaders and HRD’s we surveyed admitted they didn’t use the Levy well whilst another third said that their management team wasn’t interested in using it. 

For those who were taking advantage of the Levy, the predominant use was for up-skilling the existing workforce, with almost three-quarters of respondents using it this way. But what about diversity? 

Whilst 68% of our respondents saw the Apprenticeship Levy as an opportunity to improve diversity in their organisation, less than a third felt they had been able to improve diversity as a result of using the Levy.  

Could a lack of prioritisation in the C-suite be the underlying reason? Our survey results indicated that increasing diversity was ranked lowest for importance – but still over 50% for “highly important”. A further 39% rated diversity as “important but not crucial.”  

There is certainly room for improvement. But the potential for recruiting diverse candidates through apprenticeships is there – 70% said they see the Apprenticeship Levy as an opportunity to improve diversity in their organisation. 

We need to start from the top

Given the importance that we have seen businesses increasingly place on having a diverse workforce, there is a glaring missed opportunity to address the issue through apprenticeships – specifically by fully utilising the Levy.  

All our interviewees were keen to make their businesses more diverse and the majority of those surveyed saw it as being of high importance. But, there needs to be buy-in from leadership.  

There are people available with the skills and knowledge we need, but they are often excluded from our recruitment processes. Leaders should be encouraged to see the benefits that a diverse workforce can bring, and how broadening our talent pool can help achieve this. Apprenticeships can help. 

Hiring future talent from a variety of diverse groups will improve the range of skills and abilities, values and attitudes, perspectives and experiences that we can bring to our organisations and the services and products we provide. It makes commercial sense, and it’s the right thing to do. If we are going to make progress on creating diverse workforces, then apprenticeships have a significant and role to play. If utilised properly, the Apprenticeship Levy could super-charge diversity efforts.