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This year鈥檚 National Apprenticeship Week, which ends today, should have been a time for celebration. It was, after all, the first since the introduction last April of the government levy that was meant to transform on-the-job training in the UK. Instead, the last few months have seen a dramatic slump in the number of people taking apprenticeships. Statistics published by the Department for Education last month show that there were 27,000 apprenticeship starts last November 鈥� more than one-third fewer than the figure of 41,000 recorded in the same month in 2016. One month鈥檚 poor figures could be dismissed as a statistical blip, but the November statistics continue a pattern of decline since the levy鈥檚 introduction. The third quarter of 2017 saw a 27% year-on-year decline in apprenticeship starts to 114,000, compared with 155,000 in the same three-month period in 2016. The collapse had been even more dramatic (60%) in the previous quarter, the first following the introduction of the new levy. 

It鈥檚 not as if everything was rosy in the construction apprenticeships garden before this recent drop-off. Figures published by the House of Commons Library show that there were around 21,000 construction apprenticeships in 2016/17. This is an improvement on the figures recorded earlier in the decade but only gets back to the levels recorded during the recession of the late noughties.  

鈥淭here is a proliferation of apprenticeships that will not be very helpful for employers or parents or people advising on career choices鈥�

Chris Jones, Bam

Aside from leisure and tourism, construction is the only major sector in the economy not to see a rise in the volume of apprenticeships since 2009/10. Construction apprenticeships made up just 4.3% of all apprenticeships in 2016/17 compared with 14.8% a decade earlier, according to an analysis by IPPR for a recent report on the industry鈥檚 skills crisis. 鈥淲e鈥檝e seen growth in other sectors but in construction it still remains below the pre-crash peak,鈥� says the report鈥檚 author Jack Dromey, a senior research fellow at the left-of-centre thinktank. 

So are there intrinsic flaws in the way the apprenticeship levy works or is there something about construction that makes it uniquely unresponsive to an initiative of this kind?

Accreditation

To be fair, some teething troubles are to be expected when any new system is introduced. 鈥淐ourses weren鈥檛 in place and there was a lack of appreciation of how much was needed to make this work,鈥� says Simon Rawlinson, head of strategic research and insight at consultant Arcadis and a member of the Construction Leadership Council (CLC). 

But while the slump in apprenticeships seen across the economy over the last year is likely to be 鈥渓argely temporary鈥�, Dromey believes this won鈥檛 be the case in construction. 鈥淲hen we approach April 2019, which is when apprenticeship levy funds start to expire, there will be a big uptick in apprentice recruitment across the economy, but I don鈥檛 think that will happen in construction.鈥�

The main immediate problem for the industry is slow progress in securing accreditation for the industry鈥檚 apprenticeship standards, which is required before they can be offered by colleges.

Of the 89 proposed construction standards, just 36 have been approved by the Institute of Apprenticeships, which is responsible for vetting them. 

Chris Jones, director of learning and development at contractor Bam, admits he is frustrated about the lack of progress on accreditation, which he says extends to creating new standards in some of the 鈥渧ery basic鈥� construction disciplines. 鈥淚t鈥檚 been going on for over two years and there鈥檚 still no end in sight. If you look at the website and click on construction, there鈥檚 still not a lot approved.鈥�

It鈥檚 easier to run apprenticeship schemes in retail than in construction because they don鈥檛 have very complicated supply chains

Simon Rawlinson, Arcadis

Bruce Boughton, national people development manager at housing specialist Lovell, says the company is particularly keen to see progress on degree-level apprenticeships in construction site management and quantity surveying, both key areas of skills requirement. By tapping apprenticeship levy funding, the firm could recoup the money that it now spends on tuition fees for its graduate trainees. The company will take on 15 graduate apprentices if these new standards are approved, he reckons. 鈥淭he number of apprentices would grow significantly if we could send people we are currently sending to university part-time.鈥� 

More broadly, Jones expresses concerns about the niche nature of some of the apprenticeship standards that have been developed, which are tied to specific projects and so may be hard to transfer across the industry. 鈥淭here is a proliferation of apprenticeships that will not be very helpful for employers or parents or people advising on career choices.鈥�

Structural flaws

But the deeper problem for construction is the age-old issue of the way the industry is structured, which continues to bedevil skills training efforts. The IPPR report calculates that while the construction industry makes up around 7% of the total UK workforce, the industry will only generate about 拢50m of levy payments, which works out at about 2% of the overall total. This is because only about 880 construction companies are big enough to have to pay the levy, which only applies to firms with a wage bill of more than 拢3m. Dromey says: 鈥淚t鈥檚 a minimal percentage even though construction has a very significant requirement for skills.

鈥淔irms paying apprenticeships in construction aren鈥檛 the ones doing the on-site construction work. The training they will be doing won鈥檛 necessarily be in construction skills.鈥� In addition, he predicts there will be 鈥渟ignificant鈥� underspend of apprenticeship levy funds.

Sarah McMonagle, director of external affairs at the Federation of Master Builders (FMB), agrees that these structural issues underpin the drop-off in apprenticeship numbers. 鈥淟arge construction companies are structured in a way that they don鈥檛 directly employ their own apprentices.

鈥淭o make use of their apprenticeship vouchers they need to be able to pass them down through their supply chain 鈥� or they hire lots of admin apprentices, which is not what the construction industry is crying out for.鈥� 

Bigger firms can use their levy accounts to pass 10% of the funding of an apprenticeship onto smaller firms in their supply chains. But this support won鈥檛 make much difference for smaller firms considering whether to offer apprenticeships, she believes. 

Less fragmented sectors such as retail will be able to more effectively hoover up the apprentice levy cash, says Arcadis鈥� Rawlinson. 鈥淚ndustries that are as highly fragmented as construction don鈥檛 necessarily fit in quite as well [with the levy] as industries that are highly concentrated. It鈥檚 easier to run apprenticeship schemes in retail than in construction because they don鈥檛 have very complicated supply chains.鈥�

Unless the apprenticeship levy pot becomes fully accessible for the entire industry, money will leach out, FMB鈥檚 McMonagle predicts: 鈥淲e are going to end up funding apprentices in other sectors like retail and leisure that don鈥檛 have the same structural issues the construction industry has.鈥�  

Bam鈥檚 Jones admits the contractor is yet to get full value for money from the levy. The company鈥檚 overall level of apprentices has not risen since its introduction. The biggest impact has been the conversion of a number of day release traineeships into apprenticeships, which has enabled the contractors to save fees, he says: 鈥淏y turning it into an apprenticeship we are able to reclaim those fees.鈥�

Commercial logic

While there may be money available to support apprentices, Jones points out there needs to be a 鈥渃ommercial logic鈥� underpinning the creation of apprenticeships. 鈥淲e still have to pay wages and have workload in place: for every apprentice you take on, someone has to be a mentor.鈥� Lovell鈥檚 Boughton says that the company is still 鈥済etting to grips鈥� with the new system.

Since the introduction of the levy, Lovell has increased the number of trade apprenticeships from 25 to 38, an annual level of increase which he expects to see sustained over the next five years. But while it is 鈥渕aking progress鈥�, Boughton says the company is not yet fully drawing down the allocation in its levy account. 鈥淲e鈥檙e spending money but not at volumes that we might have expected,鈥� Boughton says, adding that progress on degree-level apprenticeships would make a big difference to the company鈥檚 apprenticeship spending. 

CITB reform

Of course, the apprenticeship levy isn鈥檛 the only game in town for the construction sector, which has its own bespoke on-the-job training scheme in the form of the CITB. The CITB has been undergoing a bruising reform over recent months. This will see the training board鈥檚 levy, which applies to all firms with a wage bill bigger than 拢80,000 per year, fall from 0.5% of 0.35% of staff costs. Even following this change, which was introduced to assuage the concerns of bigger employers that they were in effect being double charged for training, the CITB is likely to raise significantly bigger sums than the apprenticeship levy. 

The CITB鈥檚 moves to slim down its operations, which include proposals to shift its headquarters from Norfolk that are still being negotiated, are a step in the right direction, says Boughton. 鈥淭hey were bit like the BBC trying to do everything for everybody, so to refocus on core principles and be less bureaucratic is a positive step, and Sarah Beale [chief executive officer of the CITB] has been a breath of fresh air.鈥� But he reckons that Lovell still won鈥檛 get value for money from the CITB because its training programmes are more skewed towards site skills. 鈥淎s housebuilders, most of our staff are managerial and professional. We employ subcontractors to do the trade work, which are not the sort of skills being recognised in the grant scheme.鈥�

The IPPR鈥檚 Dromey hopes that changes designed to make the CITB grant application process less bureaucratic will mean that smaller firms are less reluctant to claim. But while the CITB reforms are a positive move, the existence of two levies is 鈥渘ot fundamentally sensible鈥�, he believes. 

Merging resources

In its report, the IPPR recommended that the CITB should be merged with the Construction Leadership Council (CLC) and the industry鈥檚 training funds ringfenced. Says Dromey: 鈥淲e think [construction] should have its own arrangements.鈥� FMB鈥檚 McMonagle likes the idea of the industry being able to keep its own training money. 鈥淚t wouldn鈥檛 be so bad if we knew that all the money that the construction industry puts into the pot would be used for construction apprentice training.鈥�

But having gone through the bruising process of CITB reform, which has yet to be fully delivered, it is too soon for another shake-up, Rawlinson says. 鈥淭he difficulty is that both are statutory schemes and you need legislative air time to make those changes. It鈥檚 more important to make it work for the industry by getting the right kind of training in place.鈥�

Dromey acknowledges that merger would be challenging. 鈥淚t would involve the government taking a more ambitious and interventionist approach that some may not be up for.鈥� But he argues that the depth of the industry鈥檚 skills crisis, which will be exacerbated by the drop in EU labour following Brexit, requires fundamental reform in how we train. 

鈥淭hey are going to have to bite the bullet sooner or later. The CLC is very under-resourced and the CITB is doing a decent job but its remit is very narrow. You are not going to deal with the productivity crisis in the sector without bringing the two bodies together with the power to address the collective action problems that are holding the sector back. Having built up lot of enthusiasm within the industry, we are in danger of not being able to meet expectations.鈥�

The industry will be hoping that by next year鈥檚 National Apprenticeship Week, the number of apprenticeships will be something to celebrate. But few will be holding their breath.