Small firms lead calls for £3k apprenticeship incentive for under-25s and SMEs

The Federation of Small Businesses is calling for the government to introduce the £3,000 apprenticeship incentive in England for under-25s and small businesses as National Apprenticeship Week starts this week.

And the British Retail Consortium (BRC), UKHospitality, techUK, and the Recruitment & Employment Confederation (REC) said the government is “holding back investment” in critical training that is vital to train the future workforce, provide better wages, increase productivity, and boost economic growth.

The four industry bodies sent a joint letter to Parliament calling on the government to widen the Apprenticeship Levy into a broader Skills Levy to allow businesses to spend their funds on a wider range of high-quality, accredited courses including shorter, more targeted courses, or more tailored upskilling programmes, including functional and digital skills.

So far, £3.5 billion of levy funds have expired under the use-it-or-lose-it scheme because businesses were unable to meet the restrictive requirements they must meet to draw on the levy funds they have paid in.

Amid skills shortages that are holding back small firms’ growth, FSB said apprenticeship starts should be supported as National Apprenticeship Week gets underway.

The FSB said introducing a £3,000 apprenticeship incentive for under-25s and small businesses led to a 21 per cent surge in apprenticeship starts during the COVID-19 crisis.

But with the reduction back to £1,000 for under-19s and care leavers only, apprenticeship starts plummeted by 12 per cent.

FSB policy chair Tina McKenzie said empowering small employers to attract and retain top talent is a crucial step towards unlocking the full potential of small businesses, leading to improved productivity and sustainable growth.

“Apprenticeships offer a fantastic opportunity to empower young people, but success is contingent on the right support,” she said.

“The Government’s increase of the apprenticeship incentive was a welcome effort in supporting young talent during the pandemic, but that funding was temporary, and it has been disheartening to see that commitment fall away.

“The correlation between the drop in apprenticeship starts and the reduction in financial incentives is plain to see.

“As the Chancellor looks to use his March budget to boost labour market participation and growth, he could start in no better place than by using National Apprenticeship Week to announce that he will introduce £3,000 for under 25s and SMEs, which could help unlock long-term, economic benefits for generations to come.

“With FSB figures showing that a third of small businesses recognise skills shortages as a significant hindrance to their growth, the Government must prioritise upskilling the next generation who currently face a very daunting job market.

“As National Apprenticeship Week shines a spotlight on the UK’s young workforce, it is a prime opportunity for the Government to revisit its policies by creating a £3,000 apprenticeship incentive that we know made such a difference.”

Meanwhile, in their letter to the government, the industry bodies said businesses are being blocked from investing in their workforce and creating job opportunities because of a broken Apprenticeship Levy system.

The letter stated that the current system requires businesses to contribute hundreds of millions of pounds into a pot, but it only allows these funds to be spent in an overly restricted way.

The trade bodies called on the government to widen the Apprenticeship Levy into a broader Skills Levy to allow businesses to spend their funds on a wider range of high-quality, accredited courses including shorter, more targeted courses, or more tailored upskilling programmes, including functional and digital skills.

Helen Dickinson OBE, chief executive of the British Retail Consortium, said the government must urgently fix the £3.5 billion mistake or it risks letting the UK’s anaemic productivity trail further behind its international counterparts.

“Retailers want to invest more in training a higher skilled, more productive and better paid workforce,” she said.

“They want to create more opportunities for people up and down the country. They want to contribute more to growth. But the broken Apprenticeship system is a ball and chain around their efforts. Without reforms to the Levy, retail will not be able to turbo boost equipping its workforce for the future.”