Apprenticeship Levy still a taxing issue for manufacturers

• Warming up: a quarter of manufacturers (26%) think the Levy will increase the quality of apprenticeships – a quarter (26%) also think it could attract more young people into apprenticeships
• Driving seat: a quarter of companies (26%) say the Levy will increase the responsiveness of providers to deliver relevant training – three in ten (29%) say they will be better able to buy the training their business really needs
• Key concerns: three quarters of firms (75%) worry they won’t get back what they put in – others are concerned about cost (61%), timescale for implementation (50%) and uncertainty about future rule and rate changes (44%)
• Sticking point: manufacturers operating across the UK with employees in Scotland, Wales or Northern Ireland will lose out on funding because of an incompatibility between the Levy (a tax) and the UK’s devolved skills policy
• EEF recommends an independent employer-led review of the implementation and roll-out of the Levy by the end of 2018 amidst concerns about its viability and long-term sustainability.  

Manufacturers have warmed to some of the benefits of the new Apprenticeship Levy, but still have grave reservations about its viability and longer-term sustainability, according to a new report from EEF, the manufacturers’ organisation, and Lloyds Bank Commercial Banking.

With the Levy about to be rolled out in April, over a third of manufacturers (34%) still claim to see no benefits to the scheme at all. The report warns that it is being viewed by many as simply a tax on business and, worryingly, predicts that even more manufacturers will potentially fall into scope than previously expected.

Since the Levy was announced at the 2015 Summer Budget, Government has consulted and worked intensively with industry to iron out major crinkles in the scheme. The report says that these efforts have paid off to an extent with manufacturers now far more aware of the benefits. A quarter of firms (26%) think the Levy will increase the quality of apprenticeships, while 26% think it could serve to attract more young people into apprenticeships.

With companies keen to get skills and training that will help them to meet their productivity and growth targets, firms welcome the fact that the Levy will help to put them in the driving seat. A quarter of companies (26%) say it will increase the responsiveness of providers to deliver relevant training, while three in ten (29%) say they will be better able to buy the training their business really needs.

Despite these positives it is clear, however, that the Levy is still shrouded by concerns. Firms are worried about the cost (61%), the timescale for implementation (50%) and uncertainty about future rule and rate changes (44%) – the current funding rules and rates only apply for the year ahead.

The biggest concern though is about the value firms will be able to extract from the scheme. Three quarters of manufacturers (75%) worry that they won’t get back what they put in – and with good cause according to the report.

It says that the complexity of the connected companies rule will see many more firms, including SMEs, forced to pay the Levy, but not all will be eligible for the Levy’s allowance. At the same time firms operating across the UK with employees in Scotland, Wales or Northern Ireland will also lose out on funding because of an incompatibility between the Levy (a tax) and the UK’s devolved skills policy. They will only get back the ‘English fraction’ of what they’ve paid in.

With doubts about the Levy’s overall viability and longer-term sustainability, the report urges the Government to commit to an independent employer-led review of the implementation and roll-out of the Levy by the end of 2018 in order to tackle these and any other outstanding concerns. 

Terry Scuoler, CEO of EEF, commented: “Despite much hard work and dialogue with Government, we are on the cusp of a policy rollout that continues to cause manufacturers great concern. Clearly the Apprenticeship Levy has the potential to bring benefits, but not enough to outweigh our sector’s reservations. With skills such a high priority these fears are entirely understandable and must be swiftly addressed.

“This report confirms that the Apprenticeship Levy remains a work-in-progress and must be treated as such - it requires further refining and we would urge the Government to continue to engage with business in order to make some much-needed improvements.

“Amongst a range of recommendations, we want the Government to commit to an independent employer-led review of the implementation and roll-out of the Levy by the end of 2018. This will be vital if this policy is to become fit-for-purpose and to ensure its viability and sustainability.”

Dave Atkinson, UK Head of Manufacturing at Lloyds Bank Commercial Banking, said: “Apprenticeships have a vital role to play in securing the skills businesses need to drive productivity and growth while also ensuring young people are given every opportunity to develop a fulfilling and rewarding career.

“Manufacturers are firmly behind this and have a long track record of providing high quality apprenticeship opportunities that lead to long-term careers, very often with the same employer. It’s important that the Apprenticeship Levy builds on this by supporting manufacturers’ training ambitions and acting as an enabler so that many more feel able to offer these valuable and aspirational roles.”