Engineers respond to the Apprenticeship Levy

Materials World magazine
,
3 Oct 2015

Consultation on the UK Government’s plans for a levy on large businesses to fund apprenticeships closes at the beginning of October. Simon Frost finds out how the engineering industry is responding.  

The Engineering UK Report 2015 claims that between now and 2022, there will be 2.56 million job openings in engineering companies in the UK, with 257,000 of those being new vacancies. Alongside a doubling of the number of young people studying GCSE Physics, an increase in the number of students taking Physics at A Level and a doubling of engineering graduates, the report also recommends that a doubling of engineering apprentices is required in the effort to fill these positions. 

Enter the Apprenticeship Levy, the UK Government’s latest initiative to help close Britain’s skills gap, which was offered to businesses for consultation in August 2015. 

The proposed levy will be paid by large companies – of an as-yet unspecified size – and meted out among companies of all sizes to fund apprenticeships through a voucher system, across all sectors. The Government claims it will create three million new apprenticeships over the next five years and put apprenticeships on an equal footing with degrees. It invited companies to respond to the proposal between August and October 2015.

A frosty reception

Reaction from the engineering industry has been mixed. Preliminary data from a survey undertaken by Semta, a non-profit organisation responsible for engineering skills for the future of the UK's most advanced sectors, gives some insight into the industry’s response. Of a cross-section of 70 large employers, SMEs, trade unions, colleges and training providers, 51% support its introduction, but just 24% believe that the full cost of training will be recouped through the levy funding. 

Brian Marsh, Group Safety Manager at the LSE-listed Renishaw, was less than optimistic when asked about the proposal. ‘It’s still a bit sketchy to say the least’, he began, ‘there have been no numbers discussed yet and the very structure of it is unknown. It’s almost too early to comment. For example, there’s a statement in the consultation document that says companies could get back more than they put in, but it doesn’t say how that’s going to happen. It’s just so woolly.’ 

Terry Scuoler, Chief Executive of EEF, the manufacturers’ organisation, similarly said that the Government’s ‘limited announcement provides few answers to the questions raised by manufacturing employers now facing a levy on their businesses.

‘With little detail of the size of the levy, who will be required to pay it and how much Government will give back in return, manufacturers have a right to remain sceptical that the levy will create the three million additional quality apprenticeships that we all wish to see.

‘Advanced manufacturers, in particular, who already invest heavily in high quality, long-term apprenticeships will be surprised by the suggestion from Government that it is they who are currently failing to invest in apprenticeships’. 

Indeed, major engineering companies such as Rolls-Royce are well known for their large apprenticeship take-up. Renishaw, Marsh notes, has invested heavily in apprentices for more than 35 years. BAE Systems recently committed to having 2,000 new apprentices in training by 2018. 

‘The Government has all but said that they’re going to get three million new apprentices, but they can’t afford to fund it and they don’t believe that big companies are training a fair quota of apprentices, so they’re going to hit them with a tax – those that train will get it back, in theory, and those that don’t, it’ll go into a pot and then god knows where it will go,’ said Marsh.  

BAE Systems offered the most optimistic comment. ‘As one of the largest employers of apprentices in the UK, we welcome the Government’s continued commitment to encourage quality apprenticeships,’ it stated. ‘We recognise the valuable contribution that apprentices make to our business, reflected by the fact that we will recruit more than 800 apprentices this year, including those we train for SMEs and companies in our supply chain. We value the opportunity to work with Government to help design and implement the Apprenticeship Levy.’ It offered no comment on how the Government should design and implements the levy. 

Not the first levy

Marsh notes that the idea of a levy is nothing new to the engineering industry. ‘We used to have one, years ago, in engineering. It was run by the Engineering Industry Training Board (EITB) [A previous incarnation of Semta], which imposed a trainee levy on companies based on their headcount. If you had a good training record, you didn’t have to pay most of the cost, and if you didn’t, the levy would be taken and used, but because it was controlled by the EITB and not the Government, that money was then used to train people who didn’t have sponsored places and apprenticeships to give them skills with which they could secure jobs, and it worked really well.’ 

In principle, he says, a levy system could work again, but he adds with caution, ‘Doing it through the Government and the PAYE system is not inspiring a lot of people with confidence – given the way HM Revenue and Customs operates, nobody has faith that they can actually handle this extra workload.’ 

Another question that remains unanswered in the proposal is whether the levy will be sectorial – will money taken from the engineering industry remain in the engineering industry? 77% of Semta respondents believe that it should be sectorially structured. ‘It would be preferable, absolutely,’ says Marsh, who raises another salient point – ‘The Construction Industry Training Board (CITB) has always had a levy on its members, and that’s thrown up an interesting dilemma. Will they be paying both levies? Will they have to get rid of their own one?’ 

Undermining apprenticeships?

Renishaw is part of the 5% Club – a Government-recognised body of 113 employers that have committed to at least 5% of their workforce being graduates or apprentices. I spoke to Marsh the day after the club met to discuss the proposed levy. 

‘The general consensus with the 5% Club members is that it is a virtually unworkable system as it’s being presented at the moment,’ he said, ‘but that’s partly because we still don’t know the facts that well. We don’t know what the percentages are going to be, what the cost will be – it’s been mooted in another paper in very small print that it could be as much as 0.5% of a company’s annual salary bill. Now, for a company like Tesco that would probably end up being something like £20–25m, and I don’t imagine they could possibly spend that much on apprenticeships if they wanted to’.

Or could they? A damning report in The Independent recently argued that the Government will meet its ‘mad’ apprenticeship target of three million by 2020 by encouraging young people into low-skill, on-the-job training schemes that pay £2.73 an hour, and that 60% of all new apprenticeships are now studying for qualifications worth no more than five GCSE passes. The report highlighted that there are now apprenticeships in street cleaning, warehouse labouring and shop work. Professor Alison Wolf, Baroness Wolf of Dulwich, described it as ‘a mad and artificial political target that risks undermining the reputation of apprenticeships.’

‘It’s a completely unrealistic target,’ says Marsh. ‘It may well just subsidise the Government’s inability to fund the apprenticeship scheme as it stands at the moment. I’ve been around these schemes for a while now. This one is a new approach, but the fact that Government doesn’t have any money and getting anything out of them is highly unlikely is nothing new for us to be facing. It’s just another eye roller – you roll your eyes and just get on with it.’ 

The proposal document states that Government will publish a formal response in the autumn. For more information, search Apprenticeship Levy on www.gov.uk

5.4 million people in the UK are employed in engineering enterprises.

36% of STEM teachers feel confident in giving engineering careers advice.

46% of Key Stage 2 students say a STEM subject is their favourite. 

4% of engineering apprenticeships in England were taken up by women in 2011/12.

Three in ten parents know what people in engineering do.

*Statistics taken from the Engineering UK Report 2015.