Fewer than one in five (17%) believe that the current Apprentice Levy system is working well and doesn’t require changes, according to a new survey. At the same time, employers are urging the Government to act now to boost recovery and reduce the volume of levy funds going unspent, including by increasing the ability to transfer more money to SMEs.

The survey of over 500 HR professionals, undertaken by Survation on behalf of London First, found that while four in five (80%) surveyed planned to hire at least one apprentice in the next 12 months, almost half (48%) said they’d had to return unspent Apprenticeship Levy funding to the Treasury (compared to 52% who have not returned levy funds).

Challenges in spending the levy mean only half (51%) are currently transferring unspent funds within their supply chain. Twenty-four per cent of businesses report that they have been unable to use any levy funding within their own organisation.

Two in five (41%) said that an increase in the percentage of levy they could transfer to the supply chain would make them more likely to do so, indicating that an opportunity to boost skills post-pandemic is currently being missed. Increasing it from 25% to 40% was the most popular option (30% of respondents) with 30% (22%) the second most popular. Sixteen per cent of respondents would like to see the level raised to 50%.

Organisations in the UK can receive government funding to pay for apprenticeship training, depending on turnover and whether they pay the apprenticeship levy.

When asked about the barriers to transferring levy funding to the supply chain, the most common problem was its complexity, both for the firm doing the transfer (28%), and for the SME in the supply chain (27%). Twenty-six per cent said that the inflexibility with the existing rules prevents SMEs in the supply chain from taking up the funding on offer.

Businesses also said that the Apprenticeship Levy funds could be better used if:

• The deadline for spending levy funds was extended from two to three years (35%);
• Employers were allowed to use some of the levy to contribute towards the wage costs of new apprentices (35%);
• Employers were incentivised to convert Kickstart placements into apprenticeships (35%); and
• Larger employers were able to transfer more funds to SMEs (25%).

With the appetite for apprenticeships remaining high, these changes could have a material impact on the number of apprentices hired and upskilled/reskilled.

Commenting on the survey, Mark Hilton, Membership and Skills Policy Director at London First, said:

“Apprenticeships are popular, and there is broad support for the Apprenticeship Levy as a way of re-skilling the country. However, it is clear from the survey that employers are struggling to take advantage of all the opportunities on offer. Hundreds of thousands of people lost their jobs or had their education disrupted during the pandemic. By tweaking the system, to give SMEs more of an opportunity to access funding, we can get more people into work. Failure to support businesses risks the impression that the Levy is just another tax.”

Mark Reynolds, Mace, Group Chairman and Chief Executive, said:

“This important survey highlights that Apprentice Levy reforms are needed. The Government and industry must work together to make further improvements to the levy if we are to develop our people with the skills they deserve and deliver a workforce that improves quality, competency and a more productive workforce. I hope this survey stimulates both Government and employers to take action”.