Training system needs urgent change for UK to catch its European peers

One aspect of manufacturing and engineering strength that really interests me is vocational training and apprenticeships, how they are implemented and the return these give employers.?

Those who work in the industry know the story well. It’s a simplification but apprenticeships lost their vogue and investment in the 1980s when?the political focus was on making the UK a service-sector powerhouse and neglected the important role of industrial apprenticeships. Apprentice numbers declined but then the shock of the 2007-2008 financial crisis spurred this remark from then deputy prime minister Peter Mandelson “the UK needs an economy with less?financial engineering?and more?real engineering”.

A series of interventions going back to the Apprenticeship Taskforce in 2004 (and even before then, to the Youth Training Scheme), covering Train to Gain, the Leitch Review, the UKCES Employer Investment Fund, the Richards Review of apprenticeships and more, all designed to boost formal training by employers, have come and gone. But despite all this work, two good measures of training have fallen since 2004; the proportion of people who have received job-related training in the last 13 weeks of their employment (at any period during this time), and the employer spend on on-the-job training excluding wage costs. All apprenticeship starts, which has?fluctuated,?is also down over 20-years.

?For a modern industrialised economy we simply must do better.

It's important to say that training for SMEs especially, while very important, can be both a cost and a risk. Companies need to train their employees, period, but a small firm with lean finances that invests time and money producing a few highly skilled recruits risks losing those valuable assets to others, such as a big company offering a better package. The training industry will say this should never stop the need or importance to train and qualify – but losing good people, sometimes soon after the training is completed, is a reality.?

In 2017 the government introduced The Apprenticeship Levy, seen by many as a compulsory tax on employment designed to incentivise more formal training. All companies, not only manufacturers, with a payroll of ￡3 million a year or more pay 0.5% of their annual pay bill to the Treasury. A small allowance applies. Companies can use this with or without training providers to give their staff training, and then claim the costs from the employer’s levy pot.

?Since launch, the levy has created several problems and has received criticism from employers and business groups. Partly because of bureaucracy, sometimes because the courses needed are not available, many employers do not claim their levy funds. Many businesses report difficulty in accessing the funds for the specific training requirements their business needs. Particularly acute with SME manufacturers who lack the specialist HR teams which you find in large businesses. Make UK, which represents manufacturers, says that just over ￡1 billion unspent funds returned to the Treasury in 2020/21 (most recent figures available).?

?Also, our?Relationship Directors?hear that the limit that can be claimed per apprentice is often much smaller than the cost of the apprenticeship, which can be 3-4 years and are also highly skilled focusing on the digitalisation and automation of the sector. Manufacturers tell me that they often only claim back 20%-25% of the cost of the apprenticeship.?

?Higher apprenticeships, and be flexible

?More universities now offer higher apprenticeships, that enhance the vocational learning with degree and masters’ degree level learning. Many engineering-centric universities – including Cranfield, Sheffield Hallam, Exeter, City – offer level 6 and 7 higher apprenticeships, aimed at early and mid-career workers who have several years of experience but want a degree and management skills – and the costs can be levy-covered. These have also been criticised for pulling levy funds away from early career workers. “Take up of higher level apprenticeships remains low in the manufacturing sector, with employers preferring intermediate and advanced level apprenticeships,” says Jamie Cater, senior policy manager at Make UK,?who?adds that manufacturers see apprenticeships for building a pipeline of talent, training and teaching the younger generation to become future leaders. He says, “For many, it is frustrating to see levy funds being used on level 7 apprenticeships, especially at a time when starts at intermediate and higher level have declined so significantly since the introduction of the levy.”?

?So there is a lot to fix with the Apprenticeship Levy. ?What should be done??

Advice from our customers and counsel from representative bodies says that more flexibility in how the levy applies to sectors and sub-sectors rather than a “one size fits all approach” is needed. Many companies don’t need a rigid 2, 3 or 4-year course, even if the content is relevant and would be useful. For example, allowing employers to purchase specific modules of training relevant for their business rather than having to pay for full qualifications.

Make UK also warns against scrapping the scheme wholesale. After 20+ years of schemes and programmes to boost vocational training, companies have no appetite to scrap one scheme and start a brand new one.?“Making changes to the levy to make it more flexible and accessible to employers would make a significant positive difference, rather than introducing another new system,” Jamie says.

The stakes are high.?The former?Chancellor Rishi Sunak told the House of Commons in the spring statement that the UK lags its international peers in adult technical skills. “Just 18 per cent of 25-64 hold vocational qualifications, a third lower than the OECD average, and UK employers spend just half the European average on training their employees,”?he said. The Learning and Work Institute in fact says that investment in training per employee in the UK has fallen 28% since 2005. That’s despite ￡6.8 billion of government support annually in employer training.?

Changes to the levy vocational training system must be implemented quickly by the new government as this situation has to improve if the UK is to capitalise on the new economy post-Brexit – high inflation, digitalisation, reshoring of production, free trade agreements and full employment. If we don’t better train our people, and flexibly, this rebuilding is at serious risk.

Vocational training must be a priority for not only the new Secretary of State for Education but also the new Business Secretary. Often this essential agenda falls between two stools and this government has an opportunity to address this challenge head on. To modernise the UK’s workforce in this time of rapid change, vocational education and retraining must have the same station as school education and be a top priority across Whitehall.

?References:

?https://www.makeuk.org/insights/reports/an-unlevy-playing-field-for-manufacturers