Posted on: 13/09/2019
Apprenticeships are a valuable way for SMEs to invest in growing their business and increase their productivity.
The Government’s Industrial Strategy highlights the importance of apprenticeships raising the level of skills available in the UK economy, committing to delivering three million apprenticeship starts by 20201.
In order to achieve this, the Government made changes to the way in which apprenticeship funding works, introducing an apprenticeship levy. The levy requires all employers, with a yearly wage bill of £3 million or more, to pay into a fund that finances the cost of apprenticeship schemes. These businesses can then reclaim government vouchers that help them meet the cost of their own apprenticeships.
Non-levy paying employers, the majority being micro and small-sized businesses, will share the cost of apprenticeship initiatives with the Government; this is called ‘co-investment’. Reforms to the levy in 2018 meant that the co-investment rates for apprenticeship starts, after April 2019, now have a rate of 5% in which the employer has to contribute (previously 10%). The government will pay the remaining 95%, up to the funding band maximum.
Although the introduction of this levy aimed to improve the quality and quantity of apprenticeships in the UK, official government statistics show that there was a substantial reduction in the number of apprenticeship starts in 2017/18 2. A contributing factor to this being that smaller businesses found the new system complex to navigate2. After calls for reform from business support organisations such as The Federation of Small Business (FSB), the Government acknowledged the difficulties that small businesses were having, during the spring statement 2019. Previous Chancellor of the Exchequer, Phillip Hammond promised £80 million to help reach the Industrial Strategy target of three million apprenticeship starts by 2020.
There has been a slight rise in the amount of apprenticeship starts between August 2018 and June 2019, with 361,400 starts reported, compared to the 341,700 reported in 2017/18 3, after the levy was introduced. This suggests that the extra pressure on the Government, regarding the levy, along with the extra funding/support, has helped in raising the number of apprenticeships in the UK.
Hiring an apprentice is a productive and effective way for any business to grow talent and develop a motivated, skilled and qualified workforce, with 78% of employers stating that apprenticeships improved productivity in within their business4.
Building a strong, skilled workforce
Together with the University of Hertfordshire and Hertfordshire Chamber of Commerce, Exemplas lead the consortium that delivers the Hertfordshire Growth Hub. The Growth Hub aims to unlock potential for growth and help ambitious, established SMEs to thrive.
In 2014, Malcolm Mackenzie set up Hello Flexibles, a plastic packaging supplier. Malcolm was keen to do something to help invest in youth. After approaching Hertfordshire Growth Hub, he was signposted to the University of Hertfordshire, where he found out about degree apprenticeships. This led him to take on his first apprentice. As a result, Malcolm realised that apprenticeships are a vital way to build strong, skilled workforces and grow the economy.