Ditch NICs to recover 250k drop in apprenticeship starts, small firms urge

The UK’s largest business group is urging the government to look again at its planned hikes to National Insurance Contributions (NICs) to facilitate more workplace opportunities for young people as part of levelling-up efforts.

FSB’s latest Small Business Index shows the proportion of small firms citing lack of access to appropriately skilled staff as a barrier to growth has risen 10 percentage points to 33 per cent over the past year.   

Though exemptions do exist for apprenticeships, FSB estimated that employers are paying NICs for most apprentices across the UK.

Apprenticeship starts have dropped from just under 500,000 a year in 2016/17, before the introduction of the Apprenticeship Levy, to under 325,000 in 2020/21.

Last week, the government established an aim of having “200,000 more people successfully completing high-quality skills training annually, driven by 80,000 more people completing courses in the lowest skilled areas,” as part of its levelling-up white paper.  

To address these trends, FSB is urging policymakers to:

• Remove all employer NICs costs for apprentices to spur role creation.  
• Cancel planned increases to NICs across the board and dividend taxation to free up funds for recruitment and training among entrepreneurs.  
• Reintroduce the £3,000 incentive to hire an apprentice that ran until January of this year, targeting the funding at small businesses.

FSB national chair Mike Cherry said Apprenticeship Week is a fantastic opportunity to celebrate the importance of on-the-job education and the massive benefits it brings to employee and employer alike.

“Our apprentices are our future business leaders and innovators, and that’s why we should be doing all we can to create more of them,” he said.   

“By looking again at its approach to NICs, the Government can make a real difference here – directly, by bringing down the immediate costs of taking an apprentice on, and indirectly, by freeing up more funds for recruitment and training at a moment when cash reserves are depleted.

“Small businesses disproportionately hire young people and those from disadvantaged groups when they create apprenticeships, so a targeted reintroduction of the hiring incentive that existed over lockdowns makes sense in the context of the levelling up agenda.”