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Can growth in Higher Apprenticeships help to shrink UK skills gap?

02 April 2019

Since the 2016 apprentice policy reforms, apprenticeships have often been held-up as a possible solution to help plug the UK’s widening skills gap.

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With the STEM skills gap alone continuing to cost the UK £1.5bn a year, it is a very real problem and apprenticeships have the ability to help – new data suggests that a growing uptake of higher apprenticeships could form part of the solution.

The Apprenticeship Levy

To understand the current apprenticeship landscape, it is important to understand the Apprenticeship Levy.

Coming into effect at the start of the 2017/18 UK tax year, the Apprenticeship Levy is a UK tax on employers which is used to fund apprenticeship training.

All UK employers with a pay bill of over £3 million per year pay the Apprenticeship Levy, which is set at 0.5% of the value of the employer’s pay bill.

The levy has come under a lot of scrutiny since its planned use was first unveiled in 2015, with companies finding it confusing, unhelpful, or failing to even use it at all.

However, while still in its infancy, monthly reports from the Department for Education are beginning to suggest that the levy is having a noticeable impact on apprenticeships in the UK. Namely, it is allowing employers to create more expensive, higher level, and higher skilled apprenticeships than ever before.

A higher apprenticeships push

The most recent figures from the Department for Education in March suggest a substantial higher skills shift over the last two years.

In 2017/18, there were 48,150 higher level (level 4+) apprenticeship starts, compared to just 3,700 in 2011/12. 

Higher apprenticeships are the equivalent to gaining a national diploma from a training provider, or a foundation degree from a university. This means we are seeing an additional 44,000+ skilled and highly qualified apprentices entering the workforce, working towards level 4+ qualifications. A great boon for skill-starved industries.

Further, there were 10,880 apprenticeship starts at level 6 and 7, of which 6,330 were degree apprenticeships. 

Degree apprenticeships, another scheme launched in 2015, are degree courses sponsored by companies that once again provide a way to fill highly skilled hard-to-fill roles. The two schemes combined showcase a growing flexibility in the apprenticeship infrastructure. 

The levy system is far from perfect, and still has its detractors both in government and in business, yet its ability to hand apprenticeship training funds back to companies to use how they see fit, appears to suggest an obvious and growing demand for higher skilled (level 4+) apprentices.

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What goes up...

However, gains in higher apprenticeships have preceded losses at lower level. With both intermediate (level 2) and advanced level (level 3) apprenticeship numbers dropping quite significantly. In fact, the number of starts at intermediate level in 2017/18 were the lowest in any year since 2009/10.

Does this mean that businesses are shifting their funds away from entry-level apprenticeships towards higher skilled apprenticeships in a time of skills shortage?

Experts in the industry seem to think so. Harry Williams, Digital Partnerships Manager at Best Apprenticeships, notes: ”The Apprenticeships market is showing a clear shift towards more technically demanding, higher skilled apprenticeships, with more high level apprenticeships being offered than ever before[...]The growing UK skills gap is one plausible explanation for this change in approach from business leaders.”

With Engineering and Manufacturing Technologies the third largest employer of apprentices, is this shift to higher level apprentices a positive one for our industry? Or will it leave a dearth of skills at entry-level positions with no cost-effective way to skill up these employees?

In a recent speech, Amanda Spielman, Chief Inspector at Ofsted, forecast similar concerns, saying: “This trend towards higher apprenticeships also narrows the options for the third of young people who leave school without a full level 2 qualification. I do think that we have to be concerned if this rise is limiting the options available to young people who don’t do as well at school. Their path to a good job, is after all, already a more difficult one.”

Bringing training in-house

If the trends we are seeing towards higher apprenticeships is, as we are now predicting, due to the apprenticeship levy, then we must assume this preference will only grow in the next few years.

By putting companies in charge of their apprenticeship funds, some 10% of employers have decided to bring their training in-house. Not only does this mean employers have the chance to create schemes that better fit the skills they need right now, but it also means once again they have the chance to continue prioritising higher level apprenticeships. 

Reducing the gap?

Higher apprenticeships offer a fantastic part-solution to our growing UK skills gap. They are cost-effective, tax-friendly, and utilise existing industry and educational infrastructure to produce highly skilled and motivated employees.

However, while the current shift to higher apprenticeships is surely positive in the short term, we must ensure that we, as an industry, are promoting apprenticeship uptake at all levels. If we fail to fill the gaps at all levels of skill, we risk creating an even bigger problem further down the road.

Best Apprenticeships helps connect ambitious young people with forward-thinking organisations and opportunities. Get in touch to see how we can help you promote your next apprenticeship vacancy and follow us on Twitter @BestApprentice. 

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