Nowhere is a lack of skilled people felt more keenly than in small to medium-sized enterprises (SMEs) where the struggle to recruit is often a risk to the development of the business.
According to the Leeds City Region Enterprise Partnership’s (LEP) 2019 Business Survey, one in five businesses have vacancies they find hard to fill. To combat skills gaps, which are often the reason vacancies are hard to fill, businesses often turn to apprenticeships as a solution.
This is because whilst an employee is learning key skills from a training provider, the business itself can also train up an individual in specific areas where it has a need.
Recent reports also show that apprenticeships help to future-proof businesses, with as many as 90 per cent of apprentices staying on with their employer when their apprenticeship comes to an end.
The decision to take on an apprentice in a small business is often considered a big commitment in terms of the time needed to upskill a new member of staff and the funding required.
This makes it all the more frustrating to hear from small businesses in our region that the apprenticeship levy is not working for them in its current form.
The Government introduced the levy to encourage businesses to create more apprenticeships. The idea was that only companies with an annual pay bill of £3m or more would pay in and there would be a sizeable surplus of funding that SMEs could use to create apprenticeships in a ‘co-investment’ model – meaning they would pay (as of April 2019) five per cent towards training and the Government would pay the other 95 per cent.
However, through the LEP, colleges and independent training providers have been reporting that there is a shortage of funding to support apprenticeships for non-levy paying SMEs.
National figures suggest that only a fraction of unspent levy contributions are being used and the Treasury are now also clawing funding back. We know that larger employers have unspent levy contributions yet indications are that many would be happy to transfer funds to enable small employers to recruit apprentices.
If the levy could be managed locally it would mean better co-ordination between large and small businesses, colleges and training providers, enabling us to maximise the number of apprenticeships and ensure the available funding is fully utilised.
According to a recent survey, we estimate that 300 apprentices won’t be able to start their training programme this summer because colleges and training providers are having to turn away potential learners and businesses due to the lack of funding. Not only is this damaging to local businesses, but also to people in our communities looking to make the next step in their career.
It is increasingly clear our experience is not unique, that the same trends are occurring across the country and creating significant issues for the wider UK economy.
A key finding from a recent AELP (Association of Employment and Learning Providers) report for example stated that as many as a quarter of apprenticeship training providers nationally have had to turn away prospective new SME employers.
We believe strongly in the importance of apprenticeships in giving people the skills they need to access opportunities and to ensure our businesses have the staff they need.
That is why we are calling on Government allow for a more devolved approach. This would mean levy money raised by large organisations in the region stays in the region to benefit SMEs and local people.
We are asking the Government to act as soon as possible to reduce the damage already being done to small businesses, local people and the local economy in the Leeds City Region.
A better apprenticeships system is just one of the ways we can address the skills issues we face as a region and a country. To build on our successes, we have created the Future-Ready Skills Commission which I chair.
The Commission brings together business leaders, the education sector and learners themselves to examine how the UK skills system can be shaped to meet the needs of different regions using the Leeds City Region as its case study.
We are exploring the challenges and opportunities that come with trying to equip people properly for the jobs of the 21st century.
To find out more about the work of the Commission visit: futurereadyskillscommission.com
Susan Hinchcliffe is Chair of the Future-Ready Skills Commission, Chair of the West Yorkshire Combined Authority and the Labour leader of Bradford Council.