The Apprenticeship Levy has now been in force for a year. The government’s aim in introducing the Levy was to reverse the decline in the use of apprenticeships by ring fencing funds which would be set aside in order to tackle skills shortages. One year on, has it worked?

The following figures summarise the Levy and its performance so far:

  • £3 million: the amount a company must have as an annual wage bill to pay into the Levy
  • £2 billion: the amount the Levy will raise in a year on the 20,000 companies it affects
  • £27,000: the maximum amount that can be spent on an apprentice
  • £108 million: the amount withdrawn by companies from the Levy in its first year

Since coming into force, the Levy has often attracted criticism for being an ‘additional tax’ on business and for the lack of flexibility in how employers can access and spend the funds generated by the Levy. One year on, and these concerns are still prevalent. This is particularly so in light of the published response to a freedom of information request submitted by the Open University. Figures show that, out of the £1.39 billion paid into the Levy by businesses in England, just £108 million has been drawn down for reinvestment. This perhaps indicates that employers are having difficulty with the process in place for utilising the funds raised which has been criticised as being impractical and inflexible.

But the low utilisation of funds may not be solely down to inflexibilities in the process. Representatives from the building, manufacturing and engineering industries have raised concerns that the maximum that can be drawn down per apprentice (£27,000) is not sufficient to meet the high cost of training in technical fields.

In Scotland, the Levy has been cited as a contributing factor in the recent surge of shop closures. Commenting on a report by PwC into the recent struggles of the retail industry, Scottish Retail Consortium director David Lonsdale blamed closures on a range of extra costs for businesses, including the Levy.

Overall, it is fair to say that the Apprenticeship Levy has not been particularly well received so far. In his spring statement, Chancellor Philip Hammond stated that £80 million will be diverted to small and medium enterprises to assist them in using the scheme. Whether this will improve employer engagement with the scheme remains to be seen.