Plans to create an army of three million apprentices to boost Britain’s jobs market and skills are under threat as businesses rein back on hiring trainees. At the same time industry have called for a delay in the Government’s controversial Apprenticeship Levy, a charge on larger firms to fund training across industry.
The plan, unveiled by then Chancellor George Osborne in autumn last year, has long been controversial, but bosses, even those who supported the plan, are now calling for a delay in the wake of the economic fallout from the Brexit vote.
Employers will be required to pay the equivalent of 0.5 per cent of their total annual payroll – if the payroll is more than £3million – into a levy. This will be then credited to them as a voucher they can be use to pay for apprenticeship training.
Figures from leading recruitment agency Reed show the number of apprentice vacancies on its books plunged by 29 per cent last month, compared with July 2015. Apprenticeship vacancies at Reed have been falling for the past six months, but last month’s drop was the biggest so far. James Reed, its chairman, said the fall was likely to be a result of Brexit jitters.
‘It’s one of the first things employers cut. If they become more cautious they will be thinking whether they need to be taking more apprentices right now. The commitment of taking an apprentice is much more substantial than other employees.’
In a separate blow to the Government’s apprenticeship plan, Charlie Mullins, founder of Pimlico Plumbers, which has 340 staff, 45 of them apprentices, said Ministers must hold fire on the levy. Mullins had been one of the most vociferous supporters of the levy, but now wants the scheme delayed.
‘We are still taking on people, but I’m also hearing of other companies laying off staff,’ he said. ‘For me the downturn in apprenticeships is about the threat of leaving the European Union.
‘The uncertainty right up until the referendum stopped people taking on apprentices because they’re a long-term commitment – three years – and the uncertainty has slowed it down. Apprenticeships are definitely an investment.’
Mullins’ call was echoed across industry last week. In an open letter to Government Terry Scuoler, chief executive of the Engineering Employers Federation, said: ‘Our industry is passionate about high quality apprenticeships and we want to see more of them.
‘However, if the Government pushes ahead with its current timetable for the levy we could see a decline in both the quality and quantity of apprenticeships. This would do nothing for the apprenticeship brand or the Government’s ambitious three million target.’
Calls to delay or scrap the levy in its current form are likely to grow louder ahead of the autumn statement from new Chancellor Philip Hammond, as one of a number of demands from business for Government to cut its costs to give a boost to confidence after the Brexit vote.
Lorry trailer manufacturer Cartwright, based in Altrincham, Cheshire, which has 850 staff, has always opposed the levy and argues that it is now putting companies off hiring apprentices.
Managing director Mark Cartwright said: ‘The levy is a blatant stealth tax imposed on UK businesses and does not promote the necessary training and up-skilling that is required. In fact, it does quite the opposite as it influences larger UK manufacturers not to employ more people, but consider outsourcing manufacturing to other countries, and only assemble products in the UK, enabling them to use the least number of people possible.’
James Reed argues for tangible tax cuts rather than more levies on business, saying: ‘Stepping back to look at the economy as a whole, perhaps this is a once-in-a-lifetime opportunity to strategically reposition the UK economy, to achieve a low exchange rate, low interest rate and low tax economy. There should now be tax cuts.
‘If you cut VAT, cut corporation tax and cut capital gains tax you could provide a very big stimulus. We have the problem that real wages have not been going up very fast for several years and anything we can do to put money in people’s pockets right now would be beneficial.
‘If you cut VAT to 15 per cent that would immediately increase people’s disposable income. We should implement the corporation tax cut proposed by Osborne and maybe bring it forward,’ he added, referring to Osborne’s stated ambition while still Chancellor to cut corporation tax from 20 to 15 per cent.
Nerves over hiring apprentices appear to match a wider trend among employers to hold off hiring permanent staff in favour of temporary workers. The Recruitment and Employment Confederation, which represents job agencies, said last week it had seen a sharp fall in the number of permanent vacancies in July – its fastest decline for seven years. But the number of temporary jobs available continues to rise.
Kate Shoesmith, policy director at the Recruitment and Employment Confederation, said: ‘The reason behind that is a cautious response from employers to Brexit.’ She added: ‘Where people are looking for skilled workers they are even more careful to make the right appointment permanent and are taking more time.’
The question for the Chancellor as he prepares his autumn statement is whether the drop in permanent hirings and the apparent fall in apprenticeships will be cured by time as the shock of Brexit wears off, or whether, by contrast, he needs to take more drastic action. Like most workers new in the job, he is on a steep learning curve.
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