Making the Apprenticeship Levy Transfer Work

In less than 12 months, £5 million of pledged funding has come through the WMCA Apprenticeship Levy Transfer process to fully-fund more than 150 apprentices at SMEs across the region. The aim is to collect up to £40 million by 2023 to help local people to benefit from new opportunities, with smaller businesses able to expand their workforce.

ONS figures released in August showed that West Midlands is bucking the national trend on employment. While unemployment had risen and employment has stayed static nationally, the West Midlands saw a 0.5% rise in employment and 0.5% drop in unemployment.

To date, donations have come from a range of employers including global names like HSBC, Lloyds Banking Group, BBC, National Express, BT, RAC, and even The University of Birmingham and The University of Warwick. Some brands are rooted in the region and embedded in the area’s DNA; others have recently relocated here and are keen to give something back. All realise the wider direct and indirect benefits of transferring unspent resources that would otherwise expire.

By reassigning funds, everyone gains from an increase in local skills and a diversity of candidates that boost the regional economy. Larger companies can help SMEs or those in their supply chain with a shortfall in training funding. They can show their commitment to Corporate Social Responsibility (CSR) by helping smaller organisations and start-ups gain business through employing the right staff.

This commitment to place-based regeneration is win-win. The WMCA helps to partner large employers with unspent funds with SMEs who want to take on apprentices. Our excellent local training providers act as a conduit, supporting the smaller businesses through the technical levy-transfer administration, helping them to assess the candidates and then training the apprentices.

In essence, big firms trust us, and smaller firms look to us for support and guidance. We have proven that, given the authority to operate in this space, Mayoral Combined Authorities can and should have a vital role to play as an independent and respected brokerage in the transfer process.

Making it work

Across the UK we’re crying out for skilled workers. In fact, it is estimated that the current skills gap costs the UK a colossal £63 billion a year

The story is no different here in the West Midlands. Some of this country’s most acute skills challenges are found here, in spite of this region being a central hub for the digital, construction, automotive and manufacturing sectors.

Since the introduction of the Apprenticeship Levy in April 2017, businesses with an annual wage bill of £3 million or more have been contributing to funds that pay for apprenticeship training and assessment in a bid to tackle this shortfall.

However, even with 95% of the training costs covered by Government funding, SMEs may still face training fees of around £1350 per apprentice, which can make it prohibitively expensive.

The Learning and Work Institute ‘Bridging the Gap’ report called for an additional £150 million per year to be invested in SME apprenticeships, along with increased funding for 16-18 apprenticeships from the education budget.

How such a reform could work remains unclear, but the benefits of apprenticeships to SMEs is immense. We’ve seen it first-hand here at the WMCA and are playing our part in regional regeneration.

Under the Government’s apprenticeships scheme, any levy money not spent after two years is reallocated to a central pot. What some people don’t realise, however, is that levy-paying employers can transfer up to 25% of their unspent contributions to support apprenticeships in smaller businesses.

In some areas, this is less successful, but we’re making it work in the West Midlands. So why are we feeling a positive impact more than other areas?

In simple terms, we’re in a unique position. In July 2018, the Education Secretary announced a new £69 million Skills Deal with the WMCA - the first of its kind in the country - to boost much needed technical skills, job opportunities, and productivity across the region.

The deal focussed on supporting more young people and adults into work as well as upskilling and retraining local people of all ages to enhance the regional economy. The Government co-funded it, alongside employer funding and a WMCA investment as set out in our Skills Plan.

Key to this agreement was enabling the region to work with businesses and transfer unspent levy funds locally, and the WMCA agreed to help facilitate large levy employers to fund 100% of apprenticeship training costs for SMEs.

It is this devolution of power which is proving to be so successful. We’re now one of a handful of regions that are making the Government’s Apprenticeship Levy Transfer process truly work, using a fund that other authorities are keen to model.