Apprenticeships

APP 97

Written evidence submitted by the Federation of Master Builders (FMB)

Introduction

1. The Federation of Master Builders (FMB) is the UK's largest trade association in the building industry, with national offices in England, Scotland, Wales and Northern Ireland, supported by additional regional offices. Established in 1941 to protect the interests of small and medium-sized building firms, the FMB is independent and non-profit-making. With nearly 10,000 members, the FMB is the recognised voice of small and medium-sized builders.

2. The FMB provides professional advice and support for its members, as well as a range of modern business services to save them time and money. The FMB also offers advice to consumers via its ‘find a builder’ and ‘check a builder’ websites. For more information please visit: www.fmb.org.uk.

3. The FMB’s 2010 membership survey results show that around a quarter of FMB members employ at least one apprentice. This is supported by a recent survey of FMB members, in which 25% of firms said they planned to have at least one apprentice on their books in 2012. 75% reported no firm plans to employ any apprentices this year. This recent survey took place between 9th and 20th January 2012. 360 small building firms took part and their responses provide much of the evidence for this submission. (A summary of these survey results can be found at Appendix 1 on page 7).

4. Many small building firms take great pride in providing valuable training opportunities for young people and the FMB believes the Government should continue to focus on making it easier for all small businesses to hire an apprentice. The FMB is also committed to helping ensure those that do invest in the future workforce are recognised and rewarded for their efforts.

5. Without a continued campaign by employers of all sizes to recruit and train new entrants, the construction industry is at risk of being damaged by a serious skills shortage. In recognition of this risk, the FMB launched the Cross-Industry Construction Apprenticeship Task Force (CCATF) in partnership with CITB-ConstructionSkills, the sector skills council for the construction industry, in December 2007. At the time the Construction Skills Network Labour Market Intelligence report forecast an annual recruitment requirement of 88,000 people to meet the existing demands on the industry [1] .

6. CCATF members represent employers from all sectors of the construction industry, from SME builders and specialist trades to major contractors. The unions and the FE sector are also represented, and the Department for Business, Innovation and Skills and the National Apprenticeship Service take part in the CCATF meetings (a full list of members can be found at Appendix 2 on page 8). The CCATF’s mission is ‘to champion the ethos and culture of training within the construction industry by working with industry peers and stakeholders; to encourage those not training to do so and those that train to do more by promoting the benefits and value that an apprentice can bring to an employer.’

7. The willingness of these participants to work together signified the emergence of a genuine cross-industry consensus on the need for apprenticeships to maintain a sustainable skills base in the construction industry. The economic recession dealt a serious blow to cross-industry ambitions to increase the number of construction apprenticeships, but the CCATF’s objective continues to be as critical as ever to the future of the industry.

8. The apprenticeship challenge in the construction sector has to be about helping the industry to grow its supply of skilled and qualified workers. In the tough economic climate it is more important than ever to find the right approach to tackling this challenge. Therefore, the FMB welcomes the opportunity to submit evidence to this inquiry.

Executive Summary

9. Apprenticeships remain the preferred vocational route into the construction industry for most young new entrants and employers, allowing learners to participate in craft training with the benefits of onsite experience.

10. Although the National Apprenticeship Service (NAS) has administered a large increase in apprenticeship starts in 2010/11, it is concerning that this appears to have been at least partly as a result of prioritising volume over quality. The apprenticeship brand must not be put at risk because of an inconsistent approach to the provision of apprenticeships, causing employers to lose confidence in the system.

11. The FMB welcomes the Government’s decision to make apprenticeships a spending priority, but it is extremely difficult to anticipate additional growth in construction apprenticeship numbers without growth in construction industry output.

12. Most FMB members believe level 3 should be the standard all construction apprentices aim to achieve (in the trades where level 3 provision exists). However, there is a strong sentiment that the competence and knowledge qualifications should focus much more on craft skills and less on skills more typically suited to supervisory roles.

13. The FMB welcomes the Government’s proposal for the Apprenticeship Grant for Employers of 16 to 24 year olds (AGE 16 to 24), but believes the criteria should not be so restrictive that it undermines the objective of the policy. There must be more flexibility in the eligibility criteria so that small businesses with a recent history of employing apprentices are not excluded.

14. Reduced government funding for apprentices aged 19 and over reduces the number likely to progress to level 3. The FMB believes the Government should address this problem by introducing a flexible approach to funding, which would enable all 16-18 year old apprenticeship starters to be fully funded through to level 3, regardless of their age upon converting to from level 2 to level 3.

How successful has the National Apprenticeship Service been since it was created in April 2009? Has it helped to bridge the gap between the funding departments (BIS and Department of Education)?

15. The construction industry has a long history with apprenticeships. Apprenticeships remain the preferred vocational route into the construction industry for most young new entrants and employers, allowing learners to participate in craft training with the benefits of onsite experience. It is also widely acknowledged that small and medium-sized firms provide the majority of apprenticeship opportunities in the construction industry. Approximately two thirds of apprentices in the industry are employed by SMEs and micro businesses.

16. Many of these businesses, therefore, have existing relationships with their local FE colleges or training providers, and most also rely on advice from CITB-ConstructionSkills owing to the construction industry’s levy/grant system. As a result there is little direct contact between construction employers and the NAS. In fact, a recent report from the National Audit Office revealed that the NAS is involved in setting up around 10 per cent of all apprenticeships, the rest being directly arranged between employers and providers [2] . Therefore, the NAS may want to consider building better partnerships with trade associations in order to engage with more employers and seek support with sector-specific recruitment goals.

17. Apprenticeships are needed in the construction industry to help grow the supply of skilled workers. When asked about the reasons for employing apprentices, the most popular response from FMB members was ‘training as an apprentice is the best way to learn a trade.’ Therefore, given the importance of apprenticeships, the construction industry has worked extremely hard to develop a clear and consistent definition of a construction apprenticeship to try and help maintain the quality of the training.

18. Although the NAS has administered a large increase in apprenticeship starts in 2010/11, it is concerning that this appears to have been at least partly as a result of prioritising volume over quality. The FMB is aware of short duration apprenticeship programmes, which have been approved for government funding, but in the eyes of most industry employers would be more accurately described as training courses for existing employees who already have a certain level of craft skill.

19. Owing to the decline in output in the construction sector employers are already very reluctant to recruit new entrants, preferring instead to retain skilled workers wherever possible. Despite this, the most recent Construction Skills Network Labour Market Intelligence report predicts an annual recruitment requirement for the industry of 46,000 between 2012 and 2016 [3] . It is essential, therefore, that the apprenticeship brand is not put at risk causing employers to lose confidence in the system because of an inconsistent approach to the provision of apprenticeships.

20. This is particularly important as demands on the construction industry change, largely in response to the green agenda and the need to reduce the environmental impact of the built environment. Employers expect the apprenticeship system to keep pace with changes to their skills needs, but the quality of all new apprenticeship frameworks must be consistent. If not, employers will lack the confidence to invest in new skills and, thus, lack the ability to compete for new business opportunities in the low carbon economy.

Is the extra funding promised by the coalition Government necessary for apprenticeships? How can the funding best be spent?

21. The FMB welcomes the Government’s decision to make apprenticeships a spending priority. Apprenticeships can undoubtedly help different sectors of the economy to recruit and train people according to their particular employment and skills needs. In addition, apprenticeships provide individuals with the benefit of a nationally recognised qualification and the prospect of a successful career using the skills they have acquired.

22. Therefore, the Government should provide sufficient funding for all apprenticeship training and should also consider providing financial incentives to employers that provide apprenticeship opportunities. The provision of funding should be based on evidence of the specific employment and skills needs within each sector of the economy.

23. It is important to remember that regardless of the headline announcements about increased funding to support thousands of extra apprenticeships, it is employers that are at the very heart of the apprenticeship system. When there are fewer employers with vacancies, there are fewer apprenticeships. The fall in construction output has, unsurprisingly, resulted in a fall in the number of construction apprenticeships. Demand for apprenticeship places from young people is outstripping supply.

24. It is extremely difficult to anticipate growth in construction apprenticeships without growth in construction industry output. However, according to a number of industry forecasts construction output is forecast to contract between three and five per cent in 2012. Moreover, when asked to respond to a question about the biggest barriers to hiring an apprentice, FMB members ranked ‘a lack of confidence in the economy and future workloads’ higher than all other options. In order to make any difference, therefore, the Government and the industry must continue to make the businesses case for hiring an apprentice.

Are apprenticeships of a high enough quality to benefit apprentices and their employers? Should there be more level 3 apprenticeships?

25. Apprenticeships are so successful because they are employer led and the qualifications on offer are designed to equip the learner with the skills required by the industry. However, there are concerns among small and medium sized construction firms that apprenticeships do not always offer the right balance of skills.

26. Employers need new entrant trainees to focus on learning the necessary craft skills that will enable them to become a skilled tradesperson. This is particularly important in smaller businesses that rely on high levels of productivity, but have fewer employees to fill supervisory roles. Furthermore, small and medium sized construction firms tend to work on bespoke or one off projects that are often very diverse in nature. These businesses require a level of knowledge and skill from their employees that may not be as important for businesses that work on very large projects.

27. It is important that the apprenticeship system is able to help meet the requirements of small businesses. However, almost 50% of FMB members believe the existing apprenticeship frameworks do not focus enough on craft skills. This is especially true at level 3 when employers are regularly frustrated at the focus on supervisory skills at the expense of time spent improving the apprentices’ craft skills.

28. Many employers wish their apprentices to continue to level 3 so they can progress and achieve a high standard in their trade (or trades), but can be put off by the belief that the skills needed might be best learnt by working full time on site. Where appropriate, further opportunities to progress into supervisory and management roles are extremely valuable to business and individuals and should be supported by the training and qualification system. However, the decision about the most appropriate level of apprenticeship and further training should be down to the individual and their employer.

29. While most FMB members believe level 3 should be the standard all construction apprentices aim to achieve (in the trades where level 3 exists), there is a strong sentiment that the competence and knowledge qualifications should focus less on communication, supervisory and project management skills and more on craft skills. Other solutions suggested by employers include extending the length of construction apprenticeships to four or even five years, and increasing the amount of time an apprentice spends with their employer.

Apprenticeship bonuses – how should they function? Will they encourage the involvement of more small and medium sized businesses to take on apprentices? If not, why not?

30. The FMB welcomes the Government’s proposal of an incentive payment of £1,500, payable in two stages, to help businesses employ a new apprentice. When asked what would make them more likely to hire an apprentice, FMB members ranked an incentive payment at the top of a list of possible incentives. However, in the same survey only 18% of firms suggested that the Government’s £1,500 Apprenticeship Grant would make them reconsider hiring a new apprentice. 30% of the firms that felt £1,500 wasn’t sufficient said an incentive payment of £3,000-£4,999 would be enough to change their mind.

31. Based on the views of our members, the FMB believes the Government must make two important improvements to ensure the new incentive achieves a significant increase in the number of apprenticeship opportunities.

32. Firstly, we are concerned the Government is risking the success of this policy by excluding small businesses with recent experience of training apprentices. These businesses will have a better understanding of what to expect and may, therefore, be able to provide a more suitable training environment. However, this does not mean they are any less discouraged by the cost of employing an apprentice. This is especially true at the current time when most small building firms are struggling to manage falling workloads. Therefore, the Government should introduce more flexibility into the Apprenticeship Grant for Employers (AGE 16 to 24) eligibility criteria so that small businesses with a recent history of employing apprentices are not excluded to the detriment of the young people the Government intends to help.

33. Secondly, small businesses continuously report that help to manage the cost of employing an apprentice is needed most urgently in the first year of the apprenticeship. A first year construction apprentice has only just started to learn the necessary craft skills and requires more supervision time from other employees making the team less productive. Therefore, any incentive payment must balance the need to encourage a sustainable employment opportunity with support for the employer when it is needed most.

34. Furthermore, the Government must stick to its promise to prioritise genuinely small businesses with fewer than 50 employees now that the criteria has been extended to allow businesses with up to 250 employees to qualify for the grant payment.

35. The FMB would also support an exemption from employer National Insurance contributions for all apprentices employed by small businesses as an alternative to an apprenticeship incentive payment or bonus.

Is the current funding arrangement for training of apprentices of 100% from 16-18 year olds and 50% for 19-24 year olds appropriate?

36. Employers are often motivated by the benefits of hiring apprentices over the age of 18, which can include a better level of maturity, previous work experience and fewer problems with insurance. However, the reduced funding available for this age group often means provision is harder to find. Furthermore the Government’s proposal to make employers fund the remaining 50% will significantly reduce the attractiveness of 19+ apprenticeships.

37. 88% of FMB members agreed that ‘reduced government funding for apprentices aged 19 and over reduces the number likely to progress to level 3.’ The current system limits the rate of progression to advanced apprenticeships, and thus has a negative impact on the industry’s ability to meet its skills needs. The FMB believes the Government should address this problem by introducing a flexible approach to funding, which would enable all 16-18 year old apprenticeship starters to be fully funded through to level 3, without having to commit to this qualification level in advance, and regardless of their age upon converting to level 3.

38. This approach would help training providers to record achievement rates more accurately since there would be no penalty for providers if the apprentice chose not to continue after achieving level 2. A single flexible funding contract would also prevent conversions from level 2 to level 3 apprenticeships from being recorded as additional starts, which they are in current system.

10 February 2012

Appendix 1 - Summary of survey findings

Apprenticeship employment

25% of firms responding said they planned to have at least one apprentice on their books in 2012. 75% reported no firm plans to employ any apprentices in 2012.

Reasons for employing an apprentice

The following reasons for employing an apprentice were the most popular among firms:

‘Training an apprentice is the best way to learn a trade’ (51.3%)
‘It is important to provide employment opportunities for young people’ (50.7%)
‘To ensure my business has people with the right skills’ (44.2%)

However, only 8% of firms said employing apprentices helped them to win work.

Barriers to hiring an apprentice

When asked about the barriers to hiring an apprentice the economy and cost easily outranked other options, as follows:

‘A lack of confidence in the economy and in future workloads’ (55.3%)
‘The cost of employing an apprentice’ (46.8%)

26% of firms said employing an apprentice was too complex and bureaucratic, and the same number said not being able to find the right candidate was one of the greatest barriers to hiring an apprentice.

‘Small Employer Incentive’

18% of firms suggested that the Government’s £1,500 ‘Small Employer Incentive’ would make them reconsider hiring their first ever apprentice.

30% of firms that felt £1,500 wasn’t sufficient said an incentive payment of £3,000-£4,999 would be enough to change their mind.

Other incentives

An incentive payment still ranked most highly among the respondents, when asked what would make them more likely to hire an apprentice. The following incentives are listed in order of popularity:

‘Incentive payment for hiring an apprentice’ (59.9%)
‘Exemption from paying Employer National Insurance for all apprentices’ (51.3%)
‘Cut in the rate of employer National Insurance’ (23.6%)
‘Transfer of all employment duties (e.g. payroll) to a separate organisation’ (15.9%)

Appendix 2 – List of Cross-Industry Construction Apprenticeship Task Force member organisations

Bam Nuttall

Carillion

Civil Engineering Contractors Association

CITB-ConstructionSkills

Consign Construction Skills

Denne

Department for Business, Innovation and Skills

Federation of Master Builders

Hotchkiss

Leeds College of Building

Lend Lease

National Association of Shopfitters

National Federation of Builders

National Federation of Roofing Contractors

National Specialist Contractors Council

Painting and Decorating Association

Seddon

Unite the Union

UK Contractors Group