The number of apprentices starting in small businesses has plummeted 49% since the introduction of the apprenticeship levy in 2017.

That stark figure from the Chartered Institute of Personnel and Development was included in a new report that also revealed a fall in employer investment in training and apprenticeships, despite labour shortages in many UK industries.

The apprenticeship levy requires employers with an annual wage bill of more than £3m to allocate 0.5% of their monthly payroll to a pool that is used to fund apprenticeship and training initiatives.

However, businesses have criticised the scheme for being too restrictive and limited

Daniel Todaro, managing director at marketing agency Gekko Group, said: “The system is vocational and focused on hard skills. We do not manufacture or sell physical things, which is representative of much of the UK’s output. How does a scheme that supports SMEs bypass so many firms, with no relevant apprenticeships on offer for more service-orientated businesses?” 

The CIPD has implored the government to offer greater financial support for SMEs and to provide advisory services to help them navigate the system. This is a view shared by Russell Dowers, the head of client solutions at MetaGedu Apprenticeships. “According to the CIPD report there has been a decline in training and investment in the UK workforce over the past 20 years, which has created a downward spiral that requires immediate attention,” he says.

Confusion around the levy may have bled into the employment market in another way. Recent data from Indeed reveals that UK apprenticeship job postings are down 6% over the past five years. Jack Kennedy, an economist at the jobs site, said: “Skills and labour shortages continue to be a challenge across a number of sectors in the UK, and boosting the number of apprenticeships available to jobseekers is one way to tackle this.” 

Lizzie Crowley, senior skills policy advisor at the CIPD, said the apprenticeship levy puts SMEs on the backfoot compared to large organisations: “It’s a struggle in many cases for SMEs to even source a training provider. A lot of the training provider market is focused on delivering bulk apprenticeship places to large levy-paying employers,” she said.

One large business looking to help is Deliveroo, the food delivery app, which has announced that it has gifted over £200,000 of its unspent apprenticeship levy to organisations looking to upskill their staff. Deliveroo has partnered with tech start-up Multiverse to allocate funds to more than ten small businesses, ranging from fintechs to consulting start-ups.  

Capita, the outsourcing group, has also distributed £1m of its funding. Over the past three years the company has gifted funding to UK charities, including NSPCC, Hospice UK and NHS Charities Together, through its partnership with strategic workplace training company Corndel.  

This could be a strategy that other large businesses look to follow.