Staff cuts planned to pay for Apprenticeship Levy

By Matt Atherton

- Last updated on GMT

Businesses are likely to cut staff to cover the costs of the Apprenticeship Levy
Businesses are likely to cut staff to cover the costs of the Apprenticeship Levy

Related tags Apprenticeship levy Apprenticeship Vocational education

Almost one-in-five businesses are likely to cut employee numbers to meet the costs of the Apprenticeship Levy, finds an industry-wide survey by the Confederation of British Industry (CBI) and Pearson UK.

The survey of 500 companies found almost half of food and drink manufacturers expected the levy to reduce their margins. More than a third predicted having to make cuts to other areas of training to offset the levy costs.

CBI deputy director-general Josh Hardie said: “As it stands, the levy system will work in Whitehall but it won’t work in Walsall, or any other part of the UK where business is training and developing people.

“While the ambition is positive, the current design does not recognise the breadth of great training currently being delivered.

​[It] runs the risk of unintended consequences, including fewer apprenticeship opportunities, downward pressure on wages or cut-backs on non-apprenticeship training.”

‘Unintended consequences’

More than 70% of businesses offered apprenticeships over the past year, compared with 66% previously. More than a third of these companies said they would continue their approach to training in the same way once the levy was introduced, simply absorbing the levy cost as a tax.

For this reason, Hardie said the operation of the Apprenticeship Levy, due to start in April 2017, would not work for businesses, and the government needed to make adjustments.

“Now the priority is getting the Apprenticeship Levy fit-for-purpose, as it will need a genuine change of direction if it is to work for apprentices, business and the economy,”​ said Hardie.

“Nine months out from the planned start date, businesses still lack vital information – the new administration should take the time to get this right.

‘Time is running out’

“Business remains committed to working with them to achieve this – but time is running out.”

More than 70% of business owners suggested the levy should be flexible to each company.

Hardie said: “Our survey shows how businesses develop and nurture talent, and that’s why their priority for the levy is flexibility, so companies can invest in what works.”

The survey results follow news that the Food and Drink Federation (FDF) called for the Apprenticeship Levy to be placed on pause​. It said the levy and other “planned burdens on business” ​should not be enforced until the uncertainty around Brexit finishes.

Meanwhile, food and drink manufacturers rallied behind the launch of the National Apprenticeship Week earlier this year. Businesses, including Nestlé and Britvic, committed to creating​ 3M apprenticeships by 2020.

CBI/Pearson survey results – at a glance

  • 65% demand increased flexibility to spend levy funds
  • 71% said levy should cater to individual businesses
  • 45% expect the levy to increase prices or reduce margins
  • 39% expect to cut non-apprenticeship training after the levy introduction
  • 17% expect to cut staff numbers to meet levy costs

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