Plugging the skills gap: the apprenticeship levy

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During the Spending Review the Chancellor clarified how the apprenticeship levy would work going forward. Planning and Building Control Today examines what this means for the construction industry…

The construction sector did well in yesterday’s Spending Review. Extra funding for housebuilding and significant support for infrastructure projects will certainly stand the industry in good stead going forward. If nothing else it offers stability for at least the next four years, with the guarantee that this government is on the side of builders.

However, this is not to say the industry is without problems. One major challenge has been the shortage of skilled workers, which has threatened to unravel productivity in the sector.

Apprenticeships have been a significant focus for the Conservatives, even under the previous coalition administration. Touted as a way of getting highly trained workers into skilled roles, giving them on-the-job experience, apprenticeships are undoubtedly an attractive prospect for the industry.

However, the Conservatives failed to meet any apprenticeship targets set between 2011 and 2014, raising concerns about whether the construction industry has enough skilled workers to meet growing demand.

According to an analysis carried out last month up to 100,000 new construction workers are required to meet the £411bn worth of upcoming infrastructure schemes. The National Infrastructure Plan for Skills report, which was put together by Infrastructure UK, warned around 250,000 workers would also need to be retrained for the 564 projects scheduled between now and 2020. The sector will also need to find around 150,000 more engineering construction workers by the end of the decade.

The issue is further compounded by the fact around nine per cent of employees are set to reach retirement by 2020. This will see an increased demand for younger construction workers, meaning apprenticeship programmes will need to work even harder to bring in fresh blood.

Even prior to the Spending Review the government was focused on making apprenticeships more efficient. Earlier this year a review into how apprenticeships are paid for was carried out. Yesterday, the government firmed up its plans for the levy and pushed through the confusion of what it would mean for the sector.

Osborne told the Commons: “Every employer will receive a £15,000 allowance to offset against the levy – which means over 98 per cent of all employers – and all businesses with paybills of less than £3 million – will pay no levy at all.

“Britain’s apprenticeship levy will raise £3bn a year. It will fund 3 million apprenticeships. With those paying it able to get out more than they put in.

“It’s a huge reform to raise the skills of the nation and address one of the enduring weaknesses of the British economy.”

Under the new measures, companies will pay 0.5 per cent of their payroll towards funding apprenticeship. This will reportedly raise £3bn a year and fund three million new apprenticeship place.

What this will mean for the Construction Industry Training Board (CITB), the body that currently oversees the levy, is unclear. However, in a statement the organisation’s chair James Wates said: “While today’s announcement regarding the Apprenticeship Levy creates a challenging environment for CITB across Great Britain, we will continue to support industry and work with government to ensure the best possible outcome.

“Our next step is to engage in extensive consultation with employers and work out the most effective way to continue providing the construction industry with the skills and training it needs.”

Suzannah Nichol, chief executive of contractors trade body UK Build, said the levy would raise some concerns for the sector.

She said: “We are meeting skills minister Nick Boles in a few weeks to talk through how this will work.

“They key thing is the new levy must work for industry because we desperately need skills to deliver capacity in a growing industry.”

Around 60 per cent of apprenticeship in construction are delivered by small and micro firms. The CITB hopes the major contractors will maintain the current system for training, but said it was a decision that had to be made by the industry.

Steve Radley, head of policy at the CITB, said: “The Government is very clear that it is for the industry to decide what role the CITB has going forward.

“Clearly there is a lot of work needed to be done to determine how to fulfil the industry’s wider skills needs.”

Changes will come into force in April 2017 and will force big businesses to take some of the responsibility for training new workers.

Businesses warned this would be costly for smaller firms and described it as a “payroll tax”. However, the government said it would exempt any employers with a wage bill below £3m, meaning 98 per cent of firms would not be required to pay the levy.

Institute of Directors director-general Simon Walker said: “We are very concerned by the government’s assumption that a quarter of the money collected will be spent on just administering the levy.

“Firms have been promised they will get back more than they put in, but it’s not clear how this will happen if so much is being lost in bureaucracy.”

However, the construction sector seems to be taking a more positive outlook. The British Woodworking Federation’s (BWF) chief executive Iain McIlwee said “a widening skills gap and continued uncertainty here creates real challenges”.

He added: “A steady flow of new joiners and carpenters is critical to the Chancellor’s new housing ambitions.

“We have already warned that there could be a catastrophic collapse in apprenticeships if the CITB’s services are lost to construction and this would undermine the whole vision expressed by the Chancellor.

“So we are keen to participate in the further development of the proposed Apprenticeship Levy now that government has confirmed the scope and the rate of the Levy, and has confirmed that all employers committed to training and development will be able to access this support.

“It’s particularly good news that the focus is on quality apprenticeships and ensuring standards of training are high, and we will continue to work closely with the industry’s training providers to develop improved qualifications for joinery and wood skills.

“The UK’s joinery and woodworking sector delivers a third of all apprenticeships in construction, the highest ratio in all the specialist trades.

“The joinery apprentice is the lifeblood of this industry. We are working flat out to try and increase the number of high quality apprenticeships in joinery and woodworking, helping the industry to reach its recruitment target of more than 4,000 new people a year for the next four years.”

Apprenticeships are vital for improving the outlook for the sector. Without skilled workers the government will fail to meet targets for housebuilding and major infrastructure projects, and it is only right that businesses bear some of the cost of training their workforce. However, it does leave the construction facing a number of questions about how it approaches training.

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