Apprenticeships

APP 116

Written evidence submitted by EEF

Overview

EEF, the manufacturers’ organisation, is the voice of manufacturing in the UK, representing all aspects of the manufacturing sector including engineering, aviation, defence, oil and gas, food and chemicals. With 6,000 members employing almost 1 million workers, EEF members operate in the UK, Europe and throughout the world in a dynamic and highly competitive environment. The manufacturing sector has a long and successful tradition of supporting apprenticeships and EEF members have strongly supported the growth in the number of apprenticeship starts seen in recent years. More, however, needs to be done particularly in the areas of advanced and higher apprenticeships if the UK is to increase its global competitiveness.

1. How successful has the National Apprenticeship Service, (NAS), been since it was created in April 2009? Has it helped bridge the gap between the two funding Departments? (BIS and Department for Education).

This question can only be answered by considering what the intended functions of the National Apprenticeship Service are. The service is intended to support, fund and grow apprenticeships in England. It has responsibility for growing the number of apprenticeship opportunities and for providing a dedicated service to employers and learners.

There is some evidence of success on the part of the NAS. It provides the National Apprenticeship Vacancy Matching Service (NAVMS). This has had some success in helping to promote and raise the awareness of apprenticeships generally and providing a structure that allows employers and training providers to match specific applicants with apprenticeship vacancies.

There are mixed views from employers upon what they understand the NAS is intended to achieve. This suggests a degree of confusion and lack of clarity in the communication of the NAS’s role to employers. NAS is, however, not the only public body to face this difficulty. Some employers believe that the NAS’s objective should be to raise awareness of apprenticeships amongst pre-16 year olds. Others believe that the NAS is intended to inform employers of the availability of apprenticeships and to support them in implementing apprenticeship programmes, making links between the web of agencies involved. We believe that the NAS should do all these things, reaching out to the apprentice pipeline, to their potential employers and providing clear and transparent signposting to both groups.

We believe that there is certainly a role for a single independent organisation to provide clear and transparent advice and signposting on apprenticeships. Our concern is that the NAS operates in a space crowded with other bodies seeking to provide this service. The NAS therefore has to create its own identity and achieve uniform penetration amongst employers of all sizes in order to drive demand for apprenticeships across the economy. It needs to clearly express its intended role to employers.

There has in recent years been a significant increase in the number of new apprenticeship starts, now standing at 442,700 in 2010/11. This represents an increase of 140% since 2006/7. The work of the NAS may have contributed to this success by raising the profile of apprenticeships and should be regarded as a significant achievement. Looking ahead, the NAS should provide a greater focus on the creation of advanced and higher level apprenticeships. Of the total number of apprenticeships starts in 2010/11, higher level apprenticeships accounted for less than 0.5%.

Businesses wishing to start or expand apprenticeship programmes still face a complex landscape. Recent years have seen significant reorganisations to the skills and funding systems and changes in eligibility criteria. Identifying a suitable training provider for the specialist training needed within the engineering sector can in itself be difficult.

A 2011 EEF survey of its member companies revealed that nearly 47% of respondents planned on hiring apprentices aged between 16 and 18 in the following 12 months. A further 30% planned to hire apprentices in the 19-23 age group over the same period. These manufactures will benefit in time from higher productivity, an improved skills supply, reduced labour turnover and a better fit between employer and worker. The NAS needs to clearly articulate these benefits to all employers if the quantity and quality of apprenticeship provision is to be raised in the future.

2. Is the extra funding promised by the Coalition Government necessary for apprenticeships? How can this funding best be spent?

Apprentice funding represents significant value for the taxpayer, returning £16 for every £1 spent for intermediate apprentices and £21 for every £1 spent for higher apprentices. This funding should therefore be seen a positive investment, bringing tangible benefits to the UK economy and repaying many times over the initial outlay made from public funds.

Since the publication of the Leitch review of 2006 there have been continually rising ambitions for apprenticeships in England. An increase in the available funding for apprenticeships has not always been matched by demand from individuals or businesses. The adequacy of funding and the potential for progression and alternative training should not be confused with the popularity of the scheme amongst politicians. Indeed, the funding allocated in previous years for apprenticeships has not all been spent.

This may be the result of a number of factors. It may be that there has been insufficient demand for apprentices from business, that employers are unaware of their availability or benefits of apprenticeship funding, a lack of learner awareness or that there have not been a sufficient number of learners with the right attainment levels to enter into apprenticeships. Therefore identifying clearly the reasons why apprenticeship funding in previous years has not been spent, and addressing these factors, is as important as the provision of the funding itself.

The numbers of advanced and higher apprenticeships in the manufacturing sector is still low in comparison to the total of all apprenticeships - they account together for 35% of the total, which is lower than other sectors with large numbers of apprenticeship starts. Additional funding would encourage more employers to undertake what is a significant investment, particularly at higher attainment levels. Employers bear the majority of the cost of engaging apprentices, which far outstrips the available public funding. They take a high degree of risk when hiring apprentices, which in the manufacturing sector are typically of 3 years duration. Such apprenticeships provide longer and more in depth training than those in other sectors. In contrast, currently 19% of apprenticeships as a whole last less than 6 months and 3% last less than 3 months. Increased funding will help to mitigate the risks employers take on when engaging apprentices over lengthy periods of time.

Additional funding then can best be spent on encouraging employers to retain larger numbers of apprentices and more apprentices at higher achievement levels by tackling the barriers highlighted above. Within the manufacturing sector, apprentices achieve higher post qualification salaries than other sectors. This may suggest that apprenticeships within the sector are valued more than in others and the higher achievement levels of manufacturing apprentices result in greater post qualification productivity.

Better targeted funding and a relaxation of eligibility rules would allow employers to hire a potential apprentice for a short period before commencing what may be a lengthy and costly apprenticeship. This would benefit both the potential apprentice and the employer. It would defray some of the risks employers currently endure when hiring an unknown learner and may also lead to an increase in the number of apprentices successfully completing apprenticeships as those commencing apprenticeships are more likely to have the aptitude and commitment to complete the training.

There already exist other initiatives which are targeted at the under 24 year-old age group, such as the youth contract, which has as some of its objectives the provision of large numbers of work experience placements and the provision of wage incentives to employers. Extending this concept and funding employers to provide pre-apprenticeship experience and training would encourage employers to invest in larger numbers of apprenticeships with greater security having seen the individual in the workplace.

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

Apprenticeships within the manufacturing sector are longer than in other sectors and also demand a higher levels of achievement. Within the sector, 34% are at an advanced level. Whilst the number of apprenticeships at a higher level is in overall numbers low, (80 starts in total 2010/11), this compares favourably to all other sectors other than construction and planning, with many other sectors offering no higher apprenticeships at all. The bulk of apprenticeships within manufacturing then are offered at an intermediate level.

Apprenticeship achievements within manufacturing confirm the sector’s commitment to providing longer training to a high standard. Achievements within the sector in 2010/11 were close to those in the health and care sector, one which in the same year experienced 45% more apprenticeship starts than in manufacturing. Of those apprentices who started their apprenticeships in 2007, we estimate 62% successfully concluded them.

The value of these attainment levels within manufacturing can be seen by the average net pay of apprentices by sector. Manufacturing apprentices are typically amongst the best remunerated according to research carried out by the then Department for Innovation, Universities and Skills in 2007. This reflects the achievement levels of apprentices within the sector and their contribution to their employers’ businesses. Whilst apprenticeships within the sector offer high standards of training over a long period of time, it is questioned whether this is replicated within other sectors and whether as a consequence the benefits and demands of a manufacturing apprenticeship are understood by potential learners.

We therefore welcome the recent announcement by the Minister of State for Further Education, Skills and Lifelong Learning, John Hayes MP, that the minimum duration of an apprenticeship is to be set at 12 months. This should in part reduce fears that the rapid growth in the number of apprenticeship starts may not have been matched a corresponding focus on quality control.

Manufacturing in the UK cannot compete within an increasingly global market on price alone. EEF’s report published in July 2011, entitled Flexibility in the Modern Manufacturing Workplace demonstrated the need for UK manufacturers to retain a highly skilled workforce to maintain its competitiveness. (The report is available at http://www.eef.org.uk/publications/reports/Flexibility-in-the-modern-manufacturing-workplace.htm). Ever higher levels of achievement will be needed in the future, with attainment at levels 3 and higher to compete with lower labour cost economies. Whilst there has been an expansion in recent years of the number of apprenticeship starts at level 3, these have clearly not been sufficient to satisfy the skills needs of UK manufacturers. The occupations shortage list maintained by the UK Border Agency contains 34 categories of occupation which the UK is in need of and cannot satisfy domestically. Of these, 14, or 40% are either within engineering and manufacturing or connected to the sector, illustrating the inability of UK employers to source the talent they require in the UK.

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

The introduction of apprenticeship bonuses is welcome. Together with other incentives to employers to hire apprentices, they should help persuade some businesses to take on new leaners. The incentives provide limited support - £1,500, and come with additional requirements attached. Where the apprenticeships are to last for three years, this equates to a very limited additional incentive when compared to the investment required by the employer, and may be unlikely alone to significantly outweigh the financial risk an employer incurs in training an apprentice over a lengthy period of time. Where apprenticeships are of a short duration, (with lower achievement levels), the incentive will be in proportion to the investment of the employer be larger, and may therefore be more of an inducement to take on an apprentice.

It may then be more appropriate for the incentive to vary according the length of the apprenticeship and be more closely linked to the corresponding level of investment provided by employers.

In contrast to the potential for  limited financial incentives to have an impact upon employer behaviour, greater effort short be focussed upon some of the practical difficulties which discourage employers from retaining apprentices. An improvement in the basic functional skills of learners at level 2 (particularly in single sciences, English and mathematics) would improve the quality of the pool of potential apprentices as well as the acquisition of softer workplace skills gained by an early exposure to the workplace through work experience. Effective and timely careers advice to the under 16’s, their teachers and parents would also improve the flow and quality of candidates for apprenticeship.

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

We have previously argued for an equalisation in the funding available for the training of 16-18 year olds and 19-24 year olds. The funding differential between an 18 and 19 year old learner is stark, with little attempt to taper the support provided. The justification for this sharp reduction in funding may be in part an expression of funding provided for 16-18 year olds who choose to remain within the academic education system. The level of funding provided to the age of 18 is also commensurate with the intention to require all those under the age of 18 in the future to participate in education or training.

The practical impact of the funding reduction upon employers can be significant however. There is comparatively little gained by an employer in choosing to train a 19 year old as opposed to an 18 year old in terms of additional education, qualification or maturity, and so the resource needed is the same. Learners will inevitably vary in terms of ability and competence, and a 17 year old may progress more quickly or enter the apprenticeship programme with a higher attainment level than a 19 year old. Whilst part of the rationale behind the funding levels provided was the average cost of delivery, the risks to the employer in engaging an apprentice are undiminished across age bands. The required level of support for leaners may not vary in direct proportion to their age and yet the funding provided is cut by half as the leaner passes the age of 19.

In relation to the high cost of providing training and employment to an apprentice, which is substantially met by the employer, the reduction in funding is a significant additional hurdle. The cost incurred by the employer in training a 17 year old or 19 year old changes little and does not reduce further as the apprentice ages. Employers continue to provide support in kind for learners of all ages and of course also remunerate all leaners at times when their contribution to the business is low.

Over a quarter (27% )of apprenticeships starts within manufacturing are by the over 25 year-olds as employers look to their existing workforce by upskilling and reskilling to meet their needs. Manufacturers would welcome greater support for apprentices of all ages. We are concerned that the move to loans, whereby this older category of apprentice will be required to part fund their training, will be a disincentive for individuals to pursue continual personal improvement and higher levels of skills. The move from grants to loans is already well established within the higher education sector, but the period of transition for would-be apprentices does not appear to be sensitive to the current economic conditions. Since the time that co-funding was proposed, employers recruitment plans have weakened, and a poorer business climate may have adversely impacted upon employers’ willingness to commit to long-term training. We would support a review of the co-funding model and the removal of funding entirely for the over 24 year olds and the retention of the existing rates of support until the end of the Parliament.

10 February 2012