Manufacturers concerned over Apprenticeship Levy

A report published by EEF, the manufacturers’ organisation, and Lloyds Bank Commercial Banking warns that the Apprenticeship Levy, to be introduced this April, is still viewed by many manufacturers as a tax on business, with many more firms potentially falling into scope than previously expected. And, while the manufacturing sector has warmed to some of the Levy’s perceived benefits, more than a third of manufacturers (34%) claim to see no benefits to the scheme at all:

  • 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 due to  concerns about its viability and long-term sustainability.

The report Lifting the lid on the Levy – making the Apprenticeship Levy work for industry also shows that manufacturers have warmed to some of the benefits of the new levy, with consultation by the Government leading to it addressing many major concerns. 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.

However, many manufacturers still view it as simply a tax on business and there are concerns that more manufacturers will potentially fall into its scope than previously expected. 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, chief executive of EEF, says: “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, says: “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.”

• Download the full report at eef.org.uk


Business Action is the dedicated business news service for North Devon.

Business Action is edited by journalist Robert Zarywacz, who has been writing about and commenting on business in the area since 2009.

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