Apprenticeship Levy failing to address capital’s skills shortages

  • By Jourdan Wong-Mu...

The capital’s skills shortages and productivity challenges may continue unless the present Apprenticeship Levy is reformed, London government and employers have warned.

In 2017 the government introduced the Apprenticeship Levy to give employers a greater role in addressing skills shortages and help achieve the government’s target of 3 million apprenticeships by 2020. 

A recent survey showed that of levy-paying businesses in London, 42 per cent did not expect to use any of their levy funds in the next year and a further 40 per cent of employers expect to spend less than half of the funds. This suggests that a significant amount of Apprenticeship Levy funds will not be spent in London, resulting in a loss of much-needed investment in training.

This is why a coalition of the capital’s local leaders and businesses – including the London Chamber of Commerce and Industry (LCCI) and London First – have come together to write to the Skills Minister, Anne Milton and the Chancellor, Philip Hammond, to raise their concerns and propose ways to improve how the levy works.

Among the signatories of the letter and joint paper on improvement proposals are Cllr Georgia Gould, Executive Member for Skills and Employment, London Councils; Jules Pipe CBE, Deputy Mayor for Planning, Regeneration and Skills; Jasmine Whitbread, Chief Executive, London First; and Colin Stanbridge, Chief Executive, LCCI. 

Cllr Georgia Gould, London Councils Executive Member for Skills and Employment, and Chair Central London and Skills Board, said:

“We support the Apprenticeship Levy but it is not yet working for London. Too many businesses are unable to use the levy and as a result Londoners are missing out on vital opportunities to gain skills and experience. 

“Over 58 per cent of Londoners in poverty live in a working family and nearly 600,000 Londoners want to work but can’t find a job. They urgently need change and we want to work with government and employers to reform the levy so our city can unleash the potential of Londoners.”

 Deputy Mayor for Planning, Regeneration and Skills, Jules Pipe CBE, said: 

“Apprenticeships have a really important role to play in creating the workforce of the future, particularly given the skills shortages we may see after we leave the EU. The levy is a good idea but the Mayor and I are clear that it’s not working as it should. The government needs to give London’s businesses the flexibility to help more Londoners get the skills they need to succeed.”

Chief Executive of London Chamber of Commerce and Industry, Colin Stanbridge, said:

“A lack of Brexit clarity continues to cause uncertainty amongst London’s businesses, and the impact of leaving the EU could lead to a further exacerbation of the skills shortages that some businesses in the capital already face.  

“This is why it is more vital than ever that the apprenticeships system works as effectively as it can for the capital’s businesses.  In turn this will help create local employment opportunities, to the benefit of both London boroughs and residents.”

Chief Executive of London First, Jasmine Whitbread, said:

“We were delighted to see the Chancellor act on recommendations from our Skills and Employment Action Plan to enable businesses to put their levy funds to better use.

“With three quarters of the capital’s businesses struggling to find candidates with the right skills for the job, a million vacancies to fill across the UK, and apprenticeship numbers in decline, it’s clear more needs to be done.

“That’s why we’re calling on the Government and employers to make it their mission to get the apprenticeship system firing on all cylinders, including allowing businesses to use levy funding to cover administration costs.”


Notes to editors:

London has historically had fewer apprenticeship starts than other regions. On a per capita basis, London performed worse than any other region, with 7 in every 1,000 Londoners starting an apprenticeship per year. The national average is 15 starts per 1,000 adults.

Download the joint paper, titled “Improving apprenticeship delivery in London: a submission by London local government and business.”

Download letter to Skills Minister, Rt Hon Anne Milton MP and the Chancellor Phillip Hammond MP

The joint paper calls for a mixture of short term and longer term changes.

Short term changes:

  • Allowing for pooling and joint purchasing of transferred apprenticeships.
  • Allowing some levy funding to be used for pre-employment training to get people ready for an apprenticeship. 
  • Allowing up to 10% of levy funding to cover administration costs, banded so that the smallest businesses and levy payers benefit the most.
  • Additional support to SMEs including administration costs.
  • Working with employers and providers to explore ways to increase the number of more flexible or part time apprenticeships.
  • Simplifying the system as business is facing difficulty with bureaucracy at several points in the process.

Longer term changes:

In the longer term, the government should:

  • Ring-fence unspent levy funds in London after April 2019, so that London government can support London businesses to use the levy fully and effectively.
  • Devolve the apprenticeship levy to London government, should it remain unreformed.