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Press Releases Policy publications - Employment & Skills Education & skills

New business survey shows need for Apprenticeship Levy reform

29 Mar 2018
  • Just 14% of employers who pay the Apprenticeship Levy think it is fit for purpose
  • Only around a third understand the system perfectly, and even fewer will reclaim their full Levy entitlement
  • 14% view the Levy simply as a tax
  • A quarter of those who don’t employ apprentices say they can’t because of regulatory or administrative burdens

Almost one year on since the introduction of the Apprenticeship Levy, only 14% of business leaders who pay it think it is fit for purpose, a new poll by the Institute of Directors reveals today. As it stands, fewer than one in five will use Levy contributions to take on more apprentices than otherwise. The business group said the figures showed that reform was needed. 

For directors, the skills gap remains one of the biggest factors having a negative impact on their firms. A majority of companies who use apprenticeships thought they were an important part of the mix for training. This form of training could be playing more of a role, the survey suggested, with a third of employers who don’t use  the scheme saying they are being prevented from doing so by the administrative burden or cost.   

Business leaders nevertheless have a strong commitment to training staff, with 7 in 10 members of the IoD saying they offer training to keep up with industry trends, and a third specifically providing it to help prepare staff for promotion. 

The full results of the survey can be found below.

Seamus Nevin, Head of Policy Research at the Institute of Directors, said:

“Business leaders support the Government’s drive to raise the quality and quantity of apprenticeships and to improve the prestige of vocational education. Across the country, employers in almost every sector are reporting skills shortages, and apprenticeships are a very important part of the solution.

“As this survey shows, however, the Apprenticeship Levy is not working as intended.  The new system was supposed to be employer-driven but the narrow and centrally-controlled design mean this is not happening. It is not helping firms to invest in skills and train in a way that best suits the needs of our economy. Many employers are unable to make the complex and restrictive rules fit their specific training requirements.  

“This has been reflected in official statistics, which reveal a decline in apprenticeship starts since the Levy was introduced. While the intention behind the policy is right, employers need to see a change in how it is implemented urgently.  We strongly advise that the Levy and co-funding system are reviewed in order to give employers the flexibility to develop the skills they need to be competitive, and to avoid any further drop in apprenticeship recruitment and training volumes.”

Full survey results:
642 respondents, conducted between 8-27 March 2018 

All things being equal, would you rather hire an 18 year old apprentice or a 22 year old graduate?

22 year old graduate  35%
18 year old apprentice 31%
Other (please specify) 22%
 Not applicable 13%

Do you employ an apprentice?

 Yes31%
No68%
Don't know1%

Why don’t you employ an apprentice?

Not applicable 55%
Other19%
Administrative burden14%
The calibre of apprenticeship candidates does not meet my requirements12%
Time constraints10%
Increased regulatory burden for my business10%
Cost constraints8%
Fear of 'poaching' by rival businesses2%
Don't know1%

The Government’s Apprenticeship Levy (a tax of 0.5% of the value of your payroll for employers with a payroll over £3m) came into effect in April 2017. Does your firm pay the Levy or expect to do so within the next three years?

 Yes22%
No71%
Don't know7%

Do you feel you understand sufficiently how the Government’s Apprenticeship Levy system works?

Yes, I understand the Apprenticeship Levy system perfectly 36%
No, I understand how the Levy payments work and how to reclaim our funds, but do not yet understand how the Apprenticeship standards (courses) work25%
No, I do not understand how to reclaim our Levy funds to train apprentices18%
No, I do not understand how to pay the Levy11%
Don't know11%
Other9%

Will you reclaim all of the funds you are entitled to from what you pay into the Apprenticeship Levy system?

Yes, my organisation will reclaim our full Levy entitlement to train Apprentices 28%
No, my organisation will not claim any of our funds entitlement back, just viewing the Levy as an additional tax14%
No, my organisation will only reclaim some of the funds we are entitled to. We are unable to use our full entitlement.13%
We have not planned how we would use the funds if we are brought into scope over the next three years.9%
No, my organisation will only reclaim some the funds we are entitled to. We do not need our full entitlement.6%
Don't know28%
Other3%

If your company already trains apprentices, will the Levy incentivise you to train more apprentices?

No, we will reallocate our existing training budget to train apprentices instead. 21%
Yes, we will use our Levy contribution to take on more apprentices than otherwise.19%
No, apprenticeships are not an appropriate form of training for my firms' skills needs. We will write our Apprenticeship Levy contributions as a tax and not claim our funds entitlement back.9%
No, my firm is unable to use the Apprenticeship Levy to tackle our skills needs (e.g. our payroll comprises predominantly contracted agency workers).5%
Don't know34%
Other13%

Do you feel the Government’s Apprenticeships are the most appropriate form of training to meet your firms’ skills needs?

 Yes4%
No33%
Part of a mix56%
Don't know7%

Now that the Apprenticeship Levy has been operational for a year, do you feel it is fit for purpose?

Yes, the Levy has been designed perfectly to meet my firm's needs. 9%
Yes, even though it is not relevant for my firm.5%
No, the Levy system is too difficult to navigate and understand.27%
No, the Levy has been designed in a way which does not take account of the training and skills needs of firms like mine.34%
Don't know/not applicable.34%

Apprenticeship Levy aside, does your company have a formal training programme(s) to up-skill your staff?

Yes, my company offers training to keep abreast of industry trends.69%
Yes, my company offers training to prepare a staff member for promotion.35%
Not applicable11%
Other11%
No, my business does not offer in work training to staff.7%
Don't know1%

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Donjeta Miftari, Media Relations Manager

020 7451 3285


Euan Holmes, Press Officer

020 7451 3280


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