Research suggests apprenticeship levy rules need to be adjusted

01 November 2019

Research suggests that current apprenticeship levy rules will lead to a decrease in apprenticeships in SMEs.

The Learning and Work Institute has published a report that has resulted in the warning that current apprenticeship levy policies could potentially result in a reduction in the number of apprenticeships that are offered by Small and Medium Enterprises (SMEs).

The research points out that, since the introduction of the Apprenticeship Levy in 2017, the number of apprenticeship starts have fallen by a substantial 20%. There has been a growing trend for enrolling older and pre-established staff on higher level courses, which are more costly. This could mean that the apprenticeship budget is in deficit very soon, which, could, in turn, have a detrimental effect on the funding provided to smaller organisations, who are not eligible to pay the Apprenticeship Levy. There are fears that the funds available for those who do not pay the Levy will be restricted as a result of a growing deficit within the budget.

The Learning and Work Institute states that the potential effect could be the loss of 75,000 apprenticeships at SMEs. The initial assumption on which the Apprenticeship Levy was founded was that the larger organisations would not utilise their whole levy fund, so the remainder would be available for SMEs who did not pay the levy.  This presumption was unfortunately incorrect, with larger organisations opting to use higher proportions of the funds available to them, and investing in the higher level, more expensive courses for their staff.

In order to address this issue and attempt to stop a reduction in the number of apprenticeships offered by SMEs, the Institute has offered the following recommendations:

  • Investing an additional £150m per year for apprenticeships at SMEs; 
  • Funding apprenticeships for 16 – 18-year olds from the education budget, rather than the apprenticeship levy, requiring an additional £400m per year; 
  • Requiring employers or individuals to provide top-up funding for higher and degree level apprenticeships for workers aged 25 and over. This would require employers to provide 50% of the cost of apprenticeships at level 4 and 5, and 75% of apprenticeships at level 6 and 7 for this age group, from outside of their levy funds. This would reduce levy spending by around £318m per year. 


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