Are apprenticeships the solution to the UK’s productivity downfall?

Research suggests that by 2022, there will be an additional 3.6 million jobs in medium-skilled occupations, including skilled trades and healthcare professions, in the UK alone. While this is positive news, there are notable weaknesses in the UK for intermediate professional and technical skills compared to the US, France and Germany[1].

Despite the increasing number of third level graduates, the specific range of expertise required to fill the medium skilled jobs that are becoming available is severely lacking. There have been numerous examples this year alone, one of which saw car giant Bentley struggle to fill 150 positions due to a lack of skilled staff, particularly in the manufacturing and engineering sectors.

While politicians are making suggestions for boosting growth and productivity in the UK, the skills gap is an issue that needs to be addressed with urgency. This lack of skills and the issue of the UK’s low productivity are intrinsically linked. The Recruitment and Employment Confederation (REC) revealed that there were nine areas of skills shortages in 2013, rising to colossal 43 in 2014[2].

With these shortages becoming critical, in particular those for high-level skills in sectors such as engineering, manufacturing and construction, education and in particular apprenticeships, can’t be overlooked as a strategic solution.

As a result, there is a high demand for training through effective apprenticeship programmes to ensure there is a sufficiently skilled workforce to fill these positions. According to figures from the Department for Business Innovation and Skills, there was a 13.7 per cent decrease in apprenticeship starts in the 2013/14 academic year compared to 2012/13[3].

Whilst nearly half of 18 year olds now go on to higher education, barely one in ten go on to an apprenticeship. Likewise, the amount of companies offering them is nominal[4]. There are numerous reasons for this, including demographic trends, which led to a decrease in the amount of 16-18 year olds choosing an apprenticeship over higher education. The recession also presented a challenge for businesses and decreased the likelihood of them investing in apprenticeships.

Within the recent budget however, the government has committed to tackling this skills gap and the resulting productivity issues head on, with a pledge to invest in apprenticeships as well as ensure there is the means and assistance for companies to secure a return on their investment.

Research shows that in addition to increased labour in the workplace, apprenticeships offer a number of financial benefits to a company, with typical productivity gains of over £10,000 per annum, rising to double that in the construction and planning, and engineering and manufacturing sectors[5]. An apprentice also adds value ahead of full qualification. Each apprentice in England is estimated to deliver an average positive net gain of £1,670 per annum to their employers.

The proposed government initiative could have a transformational effect on the economy and bring the UK in line with Europe when dealing with the current skills shortage. Whilst the finer details are still to come, one suggested policy is to introduce a training levy on large employers to boost the creation of apprenticeships.

The result will be a fund – per industrial sector – from which they will be able to draw to create training places and apprenticeships meeting minimum standards in terms of training, duration and qualifications. Provided quality accompanies quantity, this levy could create job opportunities and boost productivity among these knowledgeable young people.

In addition, this new generation of young adults are of an era of increased IT knowledge and capability and businesses are looking to capitalise on this. Organisations are increasingly making use of technology to streamline processes, for example, modern enterprise resource planning (ERP) platforms which give them the ability to analyse business conditions to develop improved business plans, monitor and measure progress and provide the visibility into day-to-day operations.

The focus needs to be on attracting this generation into these careers and ensuring they can utilise their existing IT knowledge to make sense of modern tools such as this. It is evident that this generation has the right skills to be used as firepower to push the growth that the UK needs.

A noticeable omission however, is any mention of a method for empirical analysis, which needs to be developed to ascertain the effectiveness of not only the training in place, but the impact on productivity across the sectors. The focus must be on encouraging UK businesses to use this as a springboard to push ahead of central Europe and to create an increased awareness of how to utilise the opportunities at our disposal.

The proposal is a very positive step towards addressing the productivity issues in the UK and with the suggested tax incentives for individuals and possible return on investment for companies, the benefits speak for themselves. Sectors such as manufacturing, engineering, energy and construction need to ensure their strategies are aligned, with productivity a key focus.

Companies have a choice to either run the apprenticeship scheme themselves, or use an apprenticeship training agency. When choosing the former, the following steps can be used as a guideline:

– Register interest in employing an apprentice with the National Apprenticeship Service
– Find a training organisation that offers apprenticeships within the select industry; they will handle the apprentice’s training, qualification and assessment
– Check the company’s entitlements for a government grant and apply
– Advertise the apprenticeship (your training organisation can do this for you)
– Select the apprentice[6]

Apprenticeships are one of the key solutions to the productivity issue currently under the microscope. With figures in the Treasury report highlighting the fact that if the UK’s productivity were commensurate with that of the US, its GDP would be raised by a staggering 31%, leaving every household £21,000 better off per annum,[7] there is no doubt this addition to the budget is a welcome one across the board.

It is now imperative that the government’s proposals become a reality and that companies respond with immediate effect.

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Type: White Paper
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