Apprenticeships: impact of general election explained

Rishi Sunak lays a brick during a workshop at Cannock College to promote apprenticeships and support from the Tories

(Image credit: Getty Images)

Many small businesses will be watching the political debate over apprenticeships with keen interest. While Labour and the Conservatives may have competing visions of how apprenticeship schemes should work in future, one thing is not in dispute: the number of smaller firms taking on apprentices has dwindled in recent years.

That’s largely because the Apprenticeship Levy, the government’s flagship policy on apprenticeship funding, was designed with bigger firms in mind. Smaller businesses are worried about the cost of funding apprenticeships, but also find it difficult to navigate a complex regulatory and administrative system. Nor have training providers done a good job of supporting employers.

Labour’s headline proposal is to introduce greater flexibility into the apprenticeship system. In particular, it thinks employers should be allowed to use up to half of their funding from the Apprenticeship Levy – or be paid directly by the government – to fund training and apprenticeships for existing staff. The Conservatives, meanwhile, want to stick with the existing system, but provide more funding by scrapping some university courses they believe offer poor value.

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Supporting apprenticeships with small businesses

Right now, one in four small businesses in the UK runs some sort of apprenticeship scheme, according to the Federation of Small Businesses. It has previously said that proper reforms of the rules would enable its members to offer two million additional apprenticeships.

Ministers have already made some progress on tackling the challenges standing in the way of smaller firms. For example, since April, small companies eligible for state funding for apprenticeship schemes no longer had to top up this cash from their own funds when taking on young workers. The regulations on large companies sharing their funding have also been loosened to allow them to finance more apprenticeships at smaller businesses.

Nevertheless, there is still a significant amount of red tape to work through when taking on apprentices. Businesses need to work with accredited apprenticeship providers – identifying the right provider for their industry – and complete a sheaf of paperwork to secure funding. There are also strict rules on the support that learners must receive throughout their apprenticeships.

It’s also important to recognise that financial support for apprenticeships is designed to cover the cost of the training itself. Employers will still need to pay their apprentices a salary – including for time spent in training and education – in line with the national minimum wage. There is some additional support available for the youngest apprentices – and those with special circumstances – but this isn’t a free lunch.

Still, there is widespread agreement that, when apprenticeship schemes work well, there are significant benefits for employers. These include reduced recruitment costs, better staff retention rates and fewer skills shortages. Labour believes these benefits will accrue from support for existing staff as well as for new recruits – flexibility that some employer groups have been calling for. The Conservatives believe the existing scheme can be made to work better for smaller firms, with extra funding already available for employers concerned about cost, rather than the other issues holding them back.

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David Prosser is a regular MoneyWeek columnist, writing on small business and entrepreneurship, as well as pensions and other forms of tax-efficient savings and investments. David has been a financial journalist for almost 30 years, specialising initially in personal finance, and then in broader business coverage. He has worked for national newspaper groups including The Financial Times, The Guardian and Observer, Express Newspapers and, most recently, The Independent, where he served for more than three years as business editor.