August 15 2016.

On Friday the government  announced its proposals for how the new funding arrangements for apprenticeships will work under a reformed apprenticeship system. The plans detail, for the first time, what proportion of the cost of training an apprentice would be borne by individual businesses, both those liable to pay the apprenticeship levy in 2017 and non-levy paying businesses.

In a key concession to calls from the Federation of Small Businesses (FSB), Ministers have proposed that smaller firms with fewer than 50 employees which take on a 16-18 year old apprentice will not be required to make any financial contribution towards the cost of training. Businesses which take on younger apprentices will also benefit from a cash incentive of £1,000 per apprentice.

“This announcement sends a clear signal that Ministers are listening to our members’ concerns. Smaller businesses are taking on more apprentices than ever before. What’s more, a quarter of our members said they are considering employing an apprentice in the future, but only if they feel apprenticeships are affordable," said Mike Cherry, FSB National Chairman.

New FSB research, published yesterday (Thursday), shows how vital this concession will be with small firms critical to achieving the Government’s target of reaching three million new apprentices by 2020.

FSB found that a quarter of small businesses (24%) already have an apprentice and 70 per cent of these businesses have an apprentice between the ages of 16-19. FSB also found that two-thirds (67%) of apprenticeships in small businesses surveyed led to longer-term employment in the business once training is complete – demonstrating how smaller firms are an important pathway to employment for many young people.

FSB had previously warned that forcing the smallest firms to contribute could lead to many firms giving up on hiring apprentices altogether. However, FSB research suggests that one in four small businesses would consider taking on an apprentice if the Government were to make it more cost-effective to do so.

In another move supported by FSB, the Government will introduce an online calculator on GOV.UK to help businesses to work out how much training an apprentice is likely to cost, and provide practical advice on how firms can support an apprentice.

Mike Cherry, continued: “While many small firms are committed to apprenticeships, many more continue to be worried about the time and personal commitment required. Getting apprenticeship reform right, including changes to existing funding arrangements, is key to apprenticeship growth among small businesses and the Government achieving its target of three million new apprenticeships over the course of this Parliament.”