£3 billion of apprenticeship funding remains unspent

Organisations have only drawn down 14 per cent of available funding from the apprenticeship levy – and from April the government will start to anything left over month by month, so The Open University is encouraging businesses to act now before they miss out on an opportunity to build skills they desperately need. 

The data, secured by The Open University through a Freedom of Information Act request1, reveals that employers have earned back just £480 million of the total funding available since May 2017. So far, only one in five (19%) levy-paying employers have made apprenticeship commitments, with many reporting some kind of frustration with the scheme. 

Additional market research undertaken by the University shows that the vast majority (94%) of employers are supportive of the apprenticeship levy in principle, but two in five (42%) would like to see changes to make the apprenticeship levy work more effectively for their organisation.  

While one in five (22%) employers say they simply haven’t had time to develop an apprenticeship strategy, many have been put off by the process for accessing funding. Two-thirds (66%) report finding the system confusing and as a result, over a third (36%) would like more guidance, while a similar proportion (35%) would like the system to be simplified. Others find that the apprenticeships available are not flexible enough to meet their needs, with 34 per cent wanting a departure from rigid apprenticeship standards. 

Although the Chancellor has announced a review of the apprenticeship levy system2, changes being made to address a number of teething problems are also having a profound effect on many business leaders’ appetites to make use of levy funding. Three in five (60%) employers expressed concern that the government has changed funding bands, while more than half (57%) say that inconsistency leaves them unable to make long-term strategic decisions. 

While two in five (38%) employers have written off their contributions to the apprenticeship levy, those who have embraced the scheme are reaping the rewards. Of those currently working with apprentices, more than a quarter (27%) say it has been good for their organisations, while one in five (20%) report that it has already delivered significant benefits.  

Currently, two-thirds (66%) of organisations are lacking management skills, while half (50%) are in need of digital skills – both crucial in the face of the current political, economical and technological environment. Those who are using apprenticeship levy funding are starting to plug these gaps across all levels of their organisation.

A quarter (25%) of those not currently using levy funding admit that they are missing out on an opportunity to develop the skills they need, but if they do want to take advantage of the funding available, they are quickly running out of time. 

From April 2019, unused funding will start to be absorbed by the UK Government at a rate of nearly £120 million a month. While the Department for Education will use the absorbed funding to invest in skills and training, this is the last opportunity for employers to use it to fill their own skills gaps and future-proof their businesses.

David Willett, Corporate Director at The Open University, said:

“Employers are missing out on a golden opportunity to close skills gaps and ensure that their organisations are equipped with the ability, agility and knowledge required to handle upcoming challenges.

“The lack of consistency from tweaks to the levy system and funding bands is having a profound effect on organisations, leaving many unable to make long-term strategic decisions about training and skills. Others simply need more support to help them develop a strategy or access the funding, and that’s where we can help. With so many employers experiencing skills shortages, it’s crucial that they make use of the levy and invest in training to ensure that their organisations remain strong and competitive in future.”

Methodology: The Open University requested data from the HM Revenues & Customs, the Education and Skills Funding Agency and the Institute for Apprenticeships under the Freedom of Information Act 2000 on 10 December 2018. All data was returned by 11 January 2019. All financial values used in this press release relate to the time period between 6 April 2017 and 6 December 2018.

The Open University commissioned VIGA (part of MIG Global) to undertake a survey of 406 senior business leaders at levy-paying organisations between 7 and 11 January 2019. Each business leader surveyed had a significant role in decision-making around recruitment, HR and training. 

HM Treasury – Budget 2018, Section 4.48