Budget 2014: What the apprenticeship announcements mean for manufacturers

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My colleague Verity O'Keefe, Employment and Skills Adviser at EEF, has written an interesting blog on the how the budget will effect Apprenticeships, I'd like to share it with you:

Budget fever is beginning to die down, giving us a chance to dig into a bit more detail as to exactly what was announced.

As we reported previously, the two big announcements on the skills front were:

  1. Extension of the Apprenticeship Grant for Employers.
  2. Additional funding for degree and postgraduate apprenticeships.

Manufacturers have a proven track record of offering Apprenticeships, with a recent EEF survey revealing that two-thirds of our members plan to recruit an apprentice in the next 12 months. The focus on Apprenticeships was then a welcome move from the manufacturing industry.

But what is the detail behind these announcements? What do they mean for manufacturers?

Let’s take the extension of the Apprenticeship Grant for Employers first.

The Grant, known as the AGE grant was introduced to support businesses to recruit individuals aged 16 to 24 into employment through the apprenticeship programme. Eligible employers are able to access £1500 to use towards the cost of recruiting, and training, an apprentice. Up until the Budget announcement, employers could be paid up to ten grants in total, if they havdless than 1000 employees and hadn’t enrolled a new recruit, or existing employee onto an Apprenticeship programmes in the past 12 months.

Six in ten EEF members having recruited an apprentice in the past 12 months, essentially ruling many EEF members out from accessing the funding. That said, our 2012 skills survey found that 16% of members had already accessed the grant and around one in five were in the process of doing so. This suggests that those member companies that were eligible were taking advantage of this additional support. With many EEF members telling us the average cost of delivering a four year engineering apprenticeship is around £80-90k, the Grant (£1500) can seem pretty small but for some it could just be the final driver to get an employer to recruit their first apprentice, or perhaps recruit one or two more.

The AGE grant was due to end in 2014…until the Budget.

Now £170m of additional finance will be made available; £85m for 2014-15 and £85m for 2015-16, meaning the AGE grant will be available for another two years. As the Grant covers 16 to 24 year olds, the funding is split across the Department for Business, Innovation and Skills (BIS) and the Department for Education (DfE).

So far, so good.

The only slight query we have is that from January 2015, “the funding will be focused on businesses with fewer than 50 employees”. This leaves a bit of a question mark over whether employers with more than 50 employees will be eligible. Whilst we fully support the move to support the smallest businesses, particularly as we enter the transition into the ‘new world’ of Apprenticeships (standards designed by industry, and funding through the employer) we want to ensure the Grant is accessible to companies that could benefit from the Grant before.

Next up was additional funding for degree and postgraduate apprenticeships.

We have definitely seen a trend towards higher-level apprenticeships. Manufacturers’ growth ambitions are putting pressure on demand for higher-level skills; whether this is craft-technician, R&D, design or sales and marketing.

Since 2010 Government has supported over 13,000 degree level apprenticeships and this figure looks set to grow. Indeed a quarter of EEF members say they
currently offer higher-level apprenticeship programmes.

Last week, the Chancellor announced £20m of new finance for degree level and postgraduate apprenticeships. £10m will be allocated for 2014-15 and another £10m for 2015-16.

The investment will part-fund the training of degree level or postgraduate apprentices, with the rest of the cost of training met by the employer.

Again this all sounds pretty good news.

But one thing we called for in our Budget submission that we didn’t get was a clear statement from Government on how much apprenticeship training will be publicly funded in the future. Whilst we have employers taking the lead on designing new apprenticeships, and a technical consultation on how Government will route funding directly through employers, we are still unaware of the proportion of training costs that will be paid for by Government, and how much the employer will be expected to contribute.

Contributing to the costs of apprenticeship training is not a new concept for manufacturers. Six in ten manufacturers say they use a combination of public and private funding to cover the costs of their apprenticeship programmes currently, and a third pay for apprenticeship provision entirely out of their own pockets.

But apprenticeships are a significant investment, particularly those in manufacturing and engineering. Employers need long-term certainty and stability on funding if they are to continue to invest. Government must state the funding available to employers for Apprenticeships in the coming years so employers can plan their future skills investment.

 

To read more blogs from the Policy team, click here.

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