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Is the fall in apprenticeship starts the beginning of a downward spiral, or just a temporary dip?

Annette Allmark, Director of Strategic Policy, People 1st

With over six months since the apprenticeship levy was introduced, the considerable fall in apprenticeship starts - 61% between May and July 2017 in comparison to the same period last year – has been a hot topic in the national press this month, and is still up for much debate.

The CBI reportedly condemned the plummeting figures and state that, while businesses continue to believe in apprenticeships, there can be no argument now that a reform of the levy system is needed.

The Department for Education (DfE), however, reasoned that the reform cannot be judged only three months in, stressing that employers have experienced a huge period of change over the last year and were taking their time to maximise the opportunity the apprenticeship levy could bring.

So is the fall in apprenticeship starts the beginning of a downward spiral, or just a blip?

To get the views of those actively involved in delivering sector apprenticeships, we spoke to two leading employers and two training experts. Overall, it’s fair to say that those we spoke to saw some merit in both the CBI and DfE’s conclusions, and agreed that a dip in starts was certainly not unexpected considering the transition to the new standards and implementation of the levy.

“Stats were bound to drop as we find our feet in this brave new world”

From an employer perspective, Alison Gilbert, group HR director of CH&Co and chair of the Institute for Apprenticeships’ Catering and Hospitality Route Panel, explains: “We have gone from learning providers driving numbers and funding to managing the process ourselves in busy environments and with tight budgets. Starts were bound to drop as we find our feet in this brave new world.”

Teething problems with the new digitalised Apprenticeship Service is a challenge consistently reported by those we spoke to, and by employers across our Apprenticeship Network.

In order to drive apprenticeship numbers, employers need confidence in the system and to be assured that the cost of administering it will not outweigh its potential benefits. Streamlining the process, permitting greater flexibility in how the account is managed and therefore reducing unnecessary bureaucracy is critical. However there needs to be a balance to keep employers in control, while affording their provider sufficient scope to operate the system effectively.

Where is the biggest drop in apprenticeship starts?

Both training experts we spoke to, Jill Whitaker, managing director of HIT Training, and Alex Khan, CEO of Lifetime, report that the biggest drop in starts has come from SMEs, who they believe could be turned off by the 10% financial contribution they now have to make to fund their apprentices. Alex Khan fears that “the historical take-up of apprenticeships in small businesses could gradually disappear,” having seen non-levy starts through Lifetime fall by over 75%.

It’s a confusing time for SMEs who have sat on the cusp of the reform. The government’s attempt to secure SME input in trailblazers has, in reality, only touched a minute fraction of this population. The practicalities of communicating the changes to apprenticeships hasn’t been well thought out.

The difficulty here is that, on the one hand, providers are having to completely change their business model to develop a new, more commercial offer that is attractive to large employers, which are naturally seeking to achieve a reportable return of investment from their levy.

At the same time, providers are also having to operate in a very different way with smaller employers that are unfamiliar with the changes.  If SMEs don’t know about the new apprenticeship standards and the potential benefits to their business, they can’t make informed decisions to invest 10% in them.

It’s not surprising that employers - large, medium and small - are all acting cautiously in their decision to invest in apprenticeships.

Jill Whitaker reports seeing first-hand the concern both levy and non-levy paying clients have with the unknown implications of Brexit. She explains: “Combined with a weaker pound and increases in costs, generally businesses have less to spend and it’s taking employers time to get their head around these challenges, which have hit them all at once”. 

Apprenticeships: critical for the sector

With 25% of the hospitality and tourism workforce alone made up of migrant workers and the cost of not retaining staff in the sector adding up to £1.1 billion annually, the important fact we can’t ignore is that apprenticeships are critical for employers that have recruitment and retention challenges.

Kathryn Porter, director of youth strategy EMEA at Hilton, and chair of the hospitality trailblazer, recognises the potential recruitment and retention crisis for the hospitality industry: “Apprenticeships are vital to our talent strategy and the government must reduce the compounding challenges faced by employers that are having to drive change across their businesses and obtain internal buy-in to the new apprenticeships and levy. This comes at a cost if businesses don’t have the necessary internal resources in place.”

Despite a strong internal campaign, Hilton has had to invest significantly into managing their Apprenticeship Service account, and believes that little consideration was given to businesses that manage the account on behalf of their connected companies.

Where to from here?

The question is: where do we go from here? Will starts continue to fall in the current period?

They certainly look likely to, as the impact of the ‘settling-in’ period will continue for some time.

There are many more challenges to deal with, such as employers continuing to be misled that 20% off-the-job learning means ‘out of the workplace’, and the issues being experienced by trailblazers that have been recognised by government, but in some cases do not feel they are genuinely being listened to.

Alex Khan remains optimistic, but stresses: “The Institute for Apprenticeships and Department for Education need to take some fairly rapid action to avoid some of the difficulties being faced by businesses. The 10% financial contribution is just one example and it will severely impact on the SME market.”

Some businesses are calling for an acceleration of the government’s plans to give levy-paying employers the option to redirect any surplus down the supply chain through to SMEs.

While this may work well for employers with very large levy accounts and a wide range of suppliers, the other school of thought - for example, from those employers that do not have enough in their levy account to maintain their historical number of starts - is that excess levy funds are better off in one pot. But how it would then be fairly distributed  remains unclear. As a starting point, having a better idea of where the government is in its thought process on this matter would help employers and providers alike.

We can’t overlook the fact that starts in the previous quarter (February to April 2017) actually increased by 47% in comparison to the previous year, with a squeeze to get as many into the original system that mainstream providers and SMEs are familiar with. This goes to show that it’s a volatile and dynamic market and everything has changed – the product, the payment method and, significantly, the roles of the organisations involved. However, what the 61% drop gives us is an opportunity to take considered action to address the priority obstacles.

“A golden opportunity”

When West Nottinghamshire College Group's Apprenticeship Reform: Six Months On event took place in the House of Commons last week, Dame Asha Khemka DBE DL, principal and chief executive of West Nottinghamshire College and board member of the Institute for Apprenticeships, described this period of apprenticeships as being a golden opportunity.

At the same time, Skills Minister Anne Milton recognised the challenges during the period of transition and acknowledged that, while the principles of the reforms are great, there needs to flexibility in the system.

To me, what is absolutely key to every single aspect of the reform is communication - and there’s a lot to do to improve on it. To what extent could some of the obstacles faced by businesses and sectors be avoided if there was more open channels of communication between employers, government and apprenticeship partners?

Going a step further, if a well-thought-out, joined-up communications strategy was in place to consult and disseminate information, then there would surely be more opportunity to fully realise ‘the golden opportunity’ that Dame Asha Khemka talked about.

The good news, putting aside for one moment the complexities of the infrastructure, is that those we spoke to remain positive about the new apprenticeships, which Jill Whitaker states are “significantly better overall than what went before.”

Echoing this, levy-paying employers who recently took part in discussions at a People 1st Apprenticeship Network event remain optimistic about implementing the new standards, but are taking time to work through the challenges to ensure they have effective strategies in place to maximise their levy investment.

So while we may still have a bumpy road ahead it is now, more than ever, that we need to continue to work in partnership to overcome the challenges and really go for it to realise the full extent of the opportunities that apprenticeships provide.

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HIT training, Lifetime and Vision Business (part of West Nottinghamshire College Group) are recognised as People 1st gold standard providers that have proven they deliver outstanding service that will help businesses achieve the best return on investment into apprenticeships. For more information visit: http://www.people1st.co.uk/gold-standard-providers/

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