The government has announced that it will fully fund apprenticeships in small businesses from 1 April by paying the full cost of training for anyone up to the age of 21, a move underpinned by a £60 million investment to enable up to 20,000 more apprenticeships for the next year.
From the start of April, the government will also increase the amount of funding that employers who are paying the apprenticeship levy can pass onto other businesses. Apprenticeships can currently be funded by a levy paying employer transferring up to 25% of their unused levy to a different employer.
Under the new measures, large employers who pay the apprenticeship levy will be able to transfer up to 50% of their funds to support other businesses, including smaller firms, to take on apprentices.
The Department for Business and Industry said this will help SMEs hire more apprentices by reducing costs and enabling more employers to get the skilled workers they need while unlocking more opportunities for young people in a huge range of sectors, industries, and professions.
Hundreds of large levy-paying employers have already taken advantage of the opportunity to transfer their unused levy funds to other businesses. As of [December 2023], 530 employers including ASDA, HomeServe and BT Group have pledged to transfer over £35.39 million to support apprenticeships in businesses of all sizes since September 2021.
Taken together, these measures are expected to enable up to 20,000 more apprenticeships, primarily for young people.
Prime Minister Rishi Sunak said: “Growing up in my mum’s pharmacy, I know first-hand how important small businesses are. Not just for the economy, but as a driver for innovation and aspiration, and as the key to building a society where hard work is always recognised and rewarded.
“Whether it’s breaking down barriers and red tape for small businesses, helping businesses hire more young people into apprenticeships and skilled jobs or empowering women to start up their own businesses – this government is sticking to the plan and leaving no stone unturned to make the UK the best place to do business.
“Taken together, these measures will unlock a tidal wave of opportunity and make a real difference to businesses and entrepreneurs across the country.”
Industry reaction
The Builders Merchants Federation (BMF) has welcomed the announcements, noting that
the package of support will provide a boost to the organisation’s Apprenticeship Pledge, launched last year with an ambitious target to create 15,000 new roles in the building materials industry by 2030.
BMF CEO John Newcomb said: “The announcement is a great step forward for an industry that needs to plug a significant skills gap and address ongoing challenges stemming from an ageing workforce.
“Around 70% of merchants in BMF membership have a turnover of less than £12.5
million, and the reforms will mean that larger Levy paying organisations will be able to transfer up to 50% of their unused apprenticeship levy funding to these SME’s.
“Apprenticeships are a key route for the development of new talent in our sector. Since launching the BMF Apprenticeship Pledge, 11,464 new apprenticeships places have already been pledged by 22 member companies, and we are confident of reaching our target of 15,000.
“The government’s buzz around apprenticeships also aligns with the major sector awareness programme the BMF will launch later this year. This will encourage talented people of all ages and from all walks of life to find out how our industry makes a difference to our homes and the built environment around us and discover which of the many and varied careers available would be right for them.”
Les Roberts, business comparison expert at Bionic, commented: “The main aim of this package is to remove financial obstacles for small businesses looking to hire apprentices.
“Under the new package, large employers who currently pay the apprenticeship levy are able to transfer up to 50% of their funds to support smaller firms looking to hire apprentices.
“The government claims that the package will open the door to 20,000 more apprenticeship opportunities for small businesses, but does it go far enough?
“The scheme helps to remove the red tape and more funding for apprenticeships will be welcome news for both business owners looking to train up staff and for young people looking to kickstart their careers. Here are just a few benefits of employing apprentices for small businesses:
- Opportunity to fill skill gap in your workforce
- Cost effective way to boost your workforce due to available funding and 1st year apprenticeship wage
- Boost productivity with enthusiastic employees who are eager to learn
- Opportunity to retain loyal employees if apprenticeship becomes full-fledged job
- Diversify your team with new talent and knowledge
“Government figures show that there were 176,500 people aged 19 to 24 participating in an apprenticeship in England during the 2022/23 academic year. But when you consider that government figures also show that UK SMEs employ 16.7 million people, it’s clear that the scheme will only help a small percentage of UK businesses boost their workforces and invest in future talent.
“Although energy prices have fallen since they peaked in 2022, inflation continues to push prices up and high interest rates are pushing up rental costs. This means tens of thousands of micro and small businesses are still facing challenging trading conditions with no sign of government support, especially as the Energy Bills Discount Scheme is coming to an end. Let’s hope this support package aimed at small businesses is the first of many.”
