Is the big fall in Apprenticeship starts a blip, or a sign of things to come?

Published on Jobs, Skills and Pay

Since the implementation of the apprenticeship levy in May of this year, many have wondered how a shift in funding – with large employers in England being required to put 0.5% of their wage bill into an apprenticeship account – would affect the number and type of apprenticeships on offer. Today, we have first sight of the figures for the final quarter of the 2016-17 academic year, which was the first quarter in which the new system was in place. And the numbers are startling.

Overall, apprenticeship starts in England are down over 60% compared with the same time last year. During Q4 2015-16 there were 117,800 starts, compared to just 43,000 in the fourth quarter of this academic year. Lower level apprenticeships (those at Level 2, equivalent to a GCSE A*-C) account for more than half (53%) of the total fall, followed by Level 3 (A-level equivalent) which accounted for 40% of the fall, and higher level apprenticeships, which having a small base, comprised just 7% of the total fall.

The number of starts fell for apprentices at all ages. However, after a bump in Q3 – the final quarter before the new levy system kicked in – older apprentices (those age 25+) saw the biggest fall: a drop of 72% compared to this time last year. Given that older apprentices currently account for a plurality of all apprenticeship starts, such a fall will have a big effect on the total change in starts for this quarter. In fact, they account for 60% of the total fall, followed by over 25% for those age 19-24.

Which sectors were hit the hardest? Provisional figures for the entire 2016-17 academic year indicate that falls were largest in retail, business, and engineering. The only sectors demonstrating growth were health and education.

The key question, of course, is ‘why has this happened?’ And as with so many questions, the answer is complicated. On the one hand, it has only been six months since the levy system kicked in: we know that as of 31st August, just over half of employers who pay into the levy have actually registered for the new apprenticeship service, which will allow them to pay for training out of their levy accounts. Whether the remaining levy payers are still in the midst of planning process is yet to be seen. The funds expire after two years, so there is some time to be had.

But there are concerns about small employers’ ability to access apprenticeship training funds; something we cautioned about back in July. The process through which non-levy payers’ access funds to train their apprentices is significantly more complicated than that of levy payers. Not to mention the fact that the process has been beset by implementation troubles.

The extent to which the fall we see today is driven by levy payers, who previously hired apprentices, taking stock and planning ahead and the extent to which it’s been driven smaller employers who suddenly can’t access the funds they had in prior years is, unfortunately, unclear. The levy itself offers a bold – and welcome – opportunity to focus on training; we just need to ensure that it works for everyone. We’ll continue to watch this space.