Co-investment rate for apprenticeship training to be halved for small employers

Autumn Budget 2018: Small employers' co-investment rate for apprenticeship training is to be cut from 10% to 5%, chancellor Philip Hammond announced in the Autumn Budget 2018.

The government is providing up to £240 million of funding to allow for the halving of the rate.

Stephen Martin, director general of the Institute of Directors, welcomed the move. He said: "The low take-up of apprentices by small businesses has been a quandary for the government since the levy was introduced, and employers will cheer the decision to reduce the co-investment rate for small firms."

The measure follows changes to the apprenticeship levy announced earlier this month, which will enable large employers to transfer up to 25% of their annual apprenticeship funds to smaller firms, including those in their supply chain, from April 2019.

Martin said: "Coupled with the chancellor's recent announcement on levy transfers, this latest move should help to unblock the apprenticeship pipeline for non-levy payers."

Ben Rowland, co-founder of training organisation Arch Apprentices, said: "It’s brilliant that the government is taking steps to reinforce apprenticeships as the way to boost skills and productivity and we hope employers will increasingly recognise them as an opportunity to accelerate their business performance and bring new life to their teams.

"Apprenticeships have been proven to create enthusiastic, loyal employees who report greater levels of satisfaction and are more likely to stay at the company long after their apprenticeship has finished."

Ian Brinkley, acting chief economist for the CIPD, meanwhile, believes the latest measure is unlikely to boost the number of apprenticeships offered by small firms, commenting that many lack the capacity to take on apprentices.

He said: "The levy is still far too rigid to work in practice for many employers. We need a more flexible training levy that can help organisations fulfil a number of training and development needs rather than shoe-horning funds and efforts into the apprenticeships model alone.

"It’s vital that the government continues to review the operation of the levy to ensure it delivers the right results for all businesses and individuals, and that it can meaningfully help address the UK’s productivity challenge. The other big issue on skills is the need to provide small businesses with much more locally provided support on developing people management capability to boost both job quality and firm performance."