Retail groups call apprenticeship levy a ‘£3.5bn mistake’ and call for urgent reform

Retail and hospitality trade bodies have called for an ‘urgent reform’ of the government’s apprenticeship levy labelling it a “£3.5bn mistake”. 

In a letter sent to ministers, UKHospitality The British Retail Consortium (BRC) and the Recruitment and Employment confederation said that the government is “holding back investment” in training that is “vital” to train future workforces, increase productivity, and boost economic growth.

According to the bodies, £3.5bn of Levy funds have expired under the use-it-or-lose-it scheme, because businesses were unable to meet the restrictive requirements they must meet to draw on the Levy funds they have paid in.

Kate Nicholls, chief executive of UKHospitality, said a “much-needed” overhaul of the system would enable businesses to go even further in their skills investment.

First introduced in 2017, the Apprenticeship Levy is a UK tax on employers which is used to fund apprenticeship training. It is payable by all employers with an annual pay bill of more than £3m, at a rate of 0.5 per cent of their total pay bill. 

However, trade bodies are now calling on the government to widen the Apprenticeship Levy into a broader Skills Levy to allow businesses to spend their funds on a wider range of accredited courses and more tailored upskilling programmes. 

Helen Dickinson OBE, chief executive of the British Retail Consortium, said that the government must urgently fix this issue, or it risks “letting the UK’s anaemic productivity trail further behind its international counterparts.”

She said: “They [the government] want to create more opportunities for people up and down the country. They want to contribute more to growth. But the broken apprenticeship system is a ball and chain around their efforts. Without reforms to the Levy, retail will not be able to turbo boost equipping its workforce for the future.”

It comes as the scheme has faced much scrutiny over the past week – with the Co-op claiming that over £600m in funding for the levy was left unused and returned to HM and Treasury.

Speaking at the time, Shirine Khoury-Haq Co-op Group chief executive, said:“The Apprenticeship Levy goes some way to encouraging businesses to invest in their people, but the government needs to better support businesses to make apprenticeships accessible to all and ensure that funding is used as effectively as possible.”

City A.M. has approached the Department of Education for a comment.