The future of apprenticeships and the apprenticeship levy

Policy Position Paper
August 2015

The government has outlined ambitious plans to create 3 million more apprenticeships by 2020, as part of a plan to address the UK’s skills gaps and create a high-skilled economy. In order to fund this, the government is proposing a new apprenticeship levy for large employers.

Balfour Beatty welcomes the commitment to rebuilding the economy through professional and technical education, and the work that has gone into rebuilding our apprenticeship system. We believe that a skilled, flexible workforce is critical to the UK infrastructure sector, wider economic productivity and international competitiveness.

Balfour Beatty recruits around 150 apprentices each year in the UK, adding to the 320 currently under training. We are also members of the 5% Club, and are committed to the aim of ensuring that 5% of our UK workforce are apprentices, graduates or sponsored students on structured education programmes within the next five years. We recognise the valuable contribution our apprentices make to our business and as the pipeline of future talent. By investing in growing numbers of apprenticeships, we believe that we are not just helping young people build productive careers and successful lives, but also making a sound investment in our own future.

We are keen to use our insight, expertise and knowledge to assist in the future development of the apprentice system and the new levy. We set out some of our thoughts over the following pages.

Funding the apprentice system

Balfour Beatty believes that a successful apprentice system for the long-term needs more money per apprentice than the government can – or should – spend. Breaking the link between a government funded system and the apprentice system could also restore a stronger link between business need and apprenticeships. At the moment, the number of apprentices in retail and business, comparatively low-skill and low-demand sectors, far outpace those in higher-skill, higher-demand sectors, such as engineering, science, IT and construction.

Top 10 sectors for apprenticeships, 20141

1. Health and Social Care
2. Business administration
3. Management
4. Hospitality and catering
5. Customer service
6. Children’s care learning and development
7. Retail
8. Construction skills
9. Engineering
10. Hairdressing

The shift from an industrial to a service economy is only part of the reason behind this. It is also, in part due to an unintended consequence of the way the current system was set up, which has resulted in training providers being incentivised to focus on shorter, easier courses to ensure they receive the outcome-related element of the apprenticeship payment. It is right that this link is broken so we can address the country’s skills shortage. The Royal Academy of Engineering, for example, predicts that by 2020 the UK will need approximately 450,000 more science, engineering and technology technicians2. The supply of qualified technicians is expected to fall far short of this.

Well designed, the apprenticeship levy could be a practical way of continuing to restore a high- quality apprentice system in the UK and of ensuring the quality and quantity of apprentices we need. However, it will need to be flexible and easy to access in order to accommodate the needs of all sizes of organisation, especially those considering taking on apprentices for the first time.

Existing apprenticeship levies

The construction industry is one of the few sectors which have a training board with the power to collect annual levy payments from companies to invest in training activities and apprenticeships. Contractors are required by law to pay 0.5% of their total PAYE spend for the year, plus 1.5% of all labour-only subcontractor payments, to the Construction Industry Training Board (CITB). However, this system can lead to confusion over how much companies that do not count construction as their main business, such as developers, have to pay into the levy. One, national levy funding all apprenticeships could result in a system that is simpler and clearer for businesses that operate across multiple sectors.

However, a national apprenticeship levy could place financial strain on firms in the construction industry if it were implemented without taking the CITB levy into account. The CITB levy is used to help train employees, to help skills development in the construction industry, and ensure high health and safety standards. It is not focussed specifically on apprenticeships, and would not necessarily fall away with the introduction of the national apprenticeship levy. One suggestion for how this could work to the advantage of all, would be if the CITB levy were substantially reduced to reflect the introduction of a national apprenticeship levy. The government could then allocate an amount to the CITB to continue to act as an apprentice training provider for the construction industry as required.

The apprenticeship levy appears to be targeted at paying for the core Skills Funding Agency (SFA) funding that apprenticeships attract; the CITB apprenticeship grants are currently in addition to SFA funding, which currently goes directly to training providers but is likely to be routed to employers under the new funding rules associated with Trailblazer apprenticeships. It is therefore important that the new levy and CITB levy are properly and fully differentiated or combined in a way that is transparent and offers employers value for money, otherwise there may be perceptions that apprenticeships are too expensive.

Nationally, a single system could make it easier for large businesses to respond to demand across different sectors, adjust to changes in the labour market, and to spread risk. However, to ensure businesses can plan, the new levy’s interaction with existing funds should be set out clearly and in good time. It will be important to ensure that this issue is covered fully in any consultation.

A phased introduction of the new apprenticeship levy would be important to ensure that standards of training are not negatively impacted. This would also give employers time to share good practice and innovative solutions across different sectors. The new Trailblazer Reforms are due to be fully implemented by August 2017. It might be prudent to plan therefore to launch the apprenticeship levy from September 2017, thereby giving industry two years to design a world class levy system.

High quality apprenticeships

The enthusiasm for creating a further three million apprenticeships underscores the importance of vocational training. However, as well as setting ambitious targets to drive change, we must ensure that the quality of apprenticeships is as high as possible.

Much of what is called an apprenticeship in the UK would not be recognised as such in other northern European economies, and there is a significant difference between apprenticeships offered in different sectors in terms of pay, duration, training and level of skill imparted. For example, more than half of engineering apprenticeships are offered at level 3, compared to just 22% in customer service and 13% in hospitality and catering. While an engineering apprentice undertakes an average of 10 hours a week in off-the-job learning, it is around two hours for a retail or customer service apprentice.

We believe that the aim must be to make our apprentice system the world’s best, at least matching in quality to Germany’s system, and offering a rewarding vocational alternative to academic routes. There is a role for government here, not only in encouraging employers to offer apprenticeships, but also in offering support to employers to ensure that they have access to examples of best practice and a full understanding of the intended aims of apprenticeships. But employers should be in the driving seat on how apprenticeships are delivered, in order to ensure we get the right quality of apprenticeships and training meets industrial needs. Ultimately, the quality of training must give confidence to industry more broadly that apprenticeships will produce the skills they need for the long-term and that, once trained, an apprentice is competent to carry out their role. It must also assure those undertaking apprenticeships that they offer a high-quality route into employment.

Helping young people make informed choices

Apprenticeships are a good way of supporting young people to acquire the skills they need to thrive in employment. Having more skilled workers is also key to improving the UK’s productivity. However, surveys show that few teachers advise their pupils about apprenticeships, and in some cases, steer them away from pursuing them3. For example, the Edge Foundation’s survey of employed 18-33 year olds found that among those who followed a vocational path, 26.5% said their school actively discouraged their decision. Some schools told young people they were “too clever” for an apprenticeship. Only 7% of existing apprentices were encouraged to pursue an apprenticeship by their school or college4. Further research by Edge found a link between some teachers’ lack of knowledge of apprenticeships and their failure to recommend them or encourage bright pupils to pursue one. The research found that two-thirds of teachers regard their knowledge of apprenticeships as poor, and just one in four teachers recommend apprenticeships over Higher Education5.

We believe that teachers should be trained in the benefits of apprenticeships to enable them to provide impartial advice about high-quality apprenticeships and technical degrees alongside traditional academic routes to university. Apprenticeships should be a key route to further education, and be fully signposted to pupils.

Our record

Balfour Beatty’s UK business employs over 20,000 people, specialising in complex, sophisticated and innovative projects, providing local and regional projects that help build lasting communities. We are committed to further enhancing our programmes aimed at providing workforce entrants and more experienced workers with access to the skills they need in order to compete in the labour market.

Balfour Beatty currently invests in apprenticeship programmes across a broad range of disciplines, employing over 300 across the UK and around 700 more young people on graduate and part-time higher education / degree schemes. Our apprenticeship programmes are mainly in civil engineering, environmental and business disciplines. This means that we have apprentices in a diverse range of roles across the business, from railway engineering, highway maintenance, and civil engineering, to commercial management, procurement and finance6. We are proud to offer all three levels of apprenticeships.

Balfour Beatty are members of the 5% Club, which seeks to increase the recruitment of apprentices and graduates into the UK workforce and help more young people find work in the growing infrastructure sector. Our Chief Executive, Leo Quinn was instrumental in the setup of the 5% Club.

We have been involved in the government apprenticeship reforms with the introduction of Trailblazer Standards programme from the beginning, leading an employer consortium on the development of fourteen new apprenticeship standards and recently signing up 15 universities and colleges to help us to deliver these new vocational education schemes. The new standards we have developed in highways maintenance, construction management, engineering and surveying disciplines will enable entrants to gain professional status and a degree. Standards developed range from level 2 for a skilled operative through to future managers of our company at degree level 6.

We recognise that we also have a role in supporting our supply chain partners to employ more apprentices and in March we recruited A-Plant to the 5% Club.

Finally, we are also committed to ensuring that young people from disadvantaged backgrounds are able to access employment and training opportunities and this is the basis of our partnership with The Prince's Trust which, in the last five years, has seen over 400 young people access the Get into Construction programme through Balfour Beatty infrastructure projects, with over 70% gaining employment or training as a result.

Contact

Veena Hudson
Head of Public Affairs | Balfour Beatty
+44 (0)20 7963 4235 | +44 (0)7790 340693 | veena.hudson@balfourbeatty.com

 

1 Skills Funding Agency data on apprenticeships, 2013-14
2 The Royal Academy of Engineering, October 2012
3 Survey carried out by OnePoll for Edge, January 2013
4 The Industry Apprentice Council, 04/03/2015
5 http://www.edge.co.uk/policy-work/news/edge-briefing-on-apprenticeships
6 http://www.balfourbeatty.com/index.asp?pageid=364