It was announced earlier this week by UK Prime Minister Rishi Sunak that the UK government is allocating £60 million in funding towards apprenticeships, and all apprenticeships in small businesses will be fully funded by the government from 1 April for people up to the age of 21.

What do the new measures mean?

Under the revised regulations, companies subject to the apprenticeship levy can now transfer as much as 50% of their unused levy to another employer, enabling the financing of apprenticeships at different organisations. This marks an increase from the previous cap of 25%. The government expects these reforms will increase the number of apprenticeships by 20,000, People Management reports.

According to employment and skills director at Business in the Community, Ola Kolade: "Supporting small businesses to tap into the apprenticeship levy funding is extremely welcomed, as there are too many young people slipping through the cracks when it comes to entering the world of work." 

In addition, the rise in the proportion of levy funding larger firms can transfer to smaller ones "could lead to a more efficient distribution of resources," said Ian Moore, managing director of Lodge Court.

Yet in contrast, although affirming that the apprenticeship funding in small firms is "welcome news," head of public policy at the Chartered Institute of Personnel and Development (CIPD), Ben Willmott stated: "The additional 20,000 apprenticeships [that] it's hoped these changes will help create isn't nearly sufficient to address the collapse in the use of apprenticeships we've seen among SMEs and young people since 2017. This gap in apprenticeship provision will largely remain."

The apprenticeship levy

There has previously been widespread scepticism regarding the effectiveness of the apprenticeship levy. Looking more closely, businesses with a pay bill surpassing £3 million must allocate 0.5% of their annual pay bill to the levy. This funding can subsequently be utilised by the employer for apprenticeship training costs, with the provision for transferring up to 25%, soon to be increased to 50%, to another business.

Fall in apprenticeship numbers 

According to a CIPD report published last October, there has been a significant decline in the number of individuals commencing apprenticeships since the levy's implementation in 2017, with a reduction of 31%. This decline is particularly pronounced among small and medium-sized enterprises with a decline of up to 49%.

"Tackling these issues and the ongoing fall in investment in workplace training requires more fundamental reform of the apprenticeship levy to make it more flexible and responsive to employer and learner needs," added the CIPD's head of public policy. "A more flexible skills levy would mean employers could use levy funding to develop existing staff through other forms of accredited training and skills development that are cheaper and usually much more suitable for employees aged 25 and over."

Additionally, Rishi Sunak's announcement comes as findings by the New Economics Foundation show employer investment in skills fell by 19% between 2011 and 2022, with a larger 25% drop in spending among larger firms.