The Institute of Directors (IoD) has joined the British Chambers of Commerce (BCC) in urging the government to address ongoing problems with the levy.
Apprenticeship starts were down 25% for the seven months to February 2018 compared with the previous year, according to statistics from the Department for Education.
The apprenticeship levy, which has been in place since 6 April 2017, means businesses with an annual wage bill of more than £3 million must pay the levy towards apprenticeship funding.
The levy is charged at 0.5% of the annual wage bill, and each employer is eligible to receive an allowance of £15,000 to offset against their levy payment.
Seamus Nevin, head of policy research at the IoD, said that “while the motivation behind the policy is laudable, the execution is flawed”. He suggested the system could be reformed by giving businesses more time and flexibility when using levy funding.
Nevin said: “If we want to boost skills, productivity and wages in our economy then the [apprenticeship] system must be reformed.
“Businesses should be afforded the flexibility to invest in more tailored courses, firms need longer to spend the money so they can use it on the apprenticeships of greatest value and larger companies could also be allowed to transmit more of the funds down to where it’s most needed.”
Jane Gratton, head of skills at the BCC, also saw inflexibility as one of the main problems with the levy, which has felt “more like a tax” for larger firms. Meanwhile, she said the changes to apprenticeships have only “added to the barriers, complexity and cost of recruiting and training staff” for SMEs.
Gratton added: “There is a consensus across the UK business community that the levy needs reform, yet our calls continue to go unanswered.
“Each month the number of apprenticeships is falling, so now has to be the time for government to work with business and training providers to sort things out.”
We’re happy to discuss the apprenticeship levy