The Hidden Cost of Axing Level 7 Apprenticeship Funding: A Threat to UK Growth and Jobs

In a recent warning, the Institute of Chartered Accountants in England and Wales (ICAEW) has raised serious concerns about the government’s proposed reform to Level 7 apprenticeship funding. The removal of levy funding for accountancy and taxation apprenticeships, ICAEW argues, could lead to unintended economic and social repercussions, including an increase in offshoring of highly-skilled UK jobs.

A Threat to UK Job Market and Growth

Level 7 apprenticeships have been a cornerstone for developing professional talent in the UK, particularly in accountancy, which is recognized as a key driver of the country’s industrial strategy. ICAEW highlights that the proposed funding cuts contradict the government’s agenda of fostering growth and economic development.

Since the introduction of the Apprenticeship Levy in 2017, the number of school leavers entering the accountancy profession has doubled. In 2022/23 alone, 9,600 Level 7 accounting and taxation apprenticeships were started, with 79% of participants aged 24 or younger. This program has also been instrumental in driving social mobility, with 85% of learners coming from state schools.

Offshoring Looms as a Real Threat

ICAEW members are deeply concerned that cutting funding will shrink the talent pool in the UK, forcing organizations to offshore highly-skilled roles to countries such as the Philippines, South Africa, and India. The Institute’s research shows that offshoring in the accountancy sector has risen dramatically, with the number of chargeable hours offshored increasing by 86% over the past three years. A further 71% increase is anticipated in the coming three years.

The cost-effectiveness of outsourcing has already made it an attractive option for firms. However, removing funding for Level 7 apprenticeships would accelerate this trend, potentially eroding the domestic job market and widening the UK’s skills gap.

Social and Economic Implications

Beyond the economic impact, the removal of funding would disproportionately affect socioeconomic diversity in the accountancy profession. Level 7 apprenticeships offer an accessible pathway for individuals from varied backgrounds to enter high-skilled professions, contributing significantly to social mobility.

ICAEW Chief Executive Alan Vallance warns that these reforms could jeopardize the government’s pledge to boost economic growth. He emphasizes the potential loss of highly-skilled domestic roles, a widening skills gap, and reduced social mobility as critical issues.

“The unintended consequences include the loss of highly-skilled domestic training roles to offshoring, a widening skills gap, and reduced social mobility,” Vallance states. “All these factors risk diminishing the ability of UK businesses to achieve the fastest growth in the G7.”

A Call for Reconsideration

ICAEW urges the government to reconsider the proposal, emphasizing the pivotal role Level 7 apprenticeships play in the UK’s economic and social landscape. Protecting funding for these programs ensures a robust talent pipeline, supports social mobility, and safeguards the UK’s position as a leader in professional services.

As the debate unfolds, the message from ICAEW is clear: cutting Level 7 apprenticeship funding risks undermining the very foundation of the UK’s growth agenda.