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The New Apprenticeship Levy

17th November 2016 Jess Penny, Penny Hydraulics

Jessica Penny from Penny Hydraulics provides a family business insight on how the new Apprenticeship Levy will help close the manufacturing skills gap.

What’s the problem?

Initially published in 2001, the Skills Gap Report which was published in partnership with Deloitte was a study which indicated a mismatch between the skills of available working people and the skills that the manufacturing industry required. The reports that followed confirmed that gap and showed an increasing mismatch of skills.

The shortage of senior, highly-skilled engineers across the board in the UK has been highlighted by figures released in the latest manufacturing purchasing managers’ index (PMI) which has now reached its lowest level in more than three years, following the EU referendum. 

Understanding the skills gap

To understand the skills gap, we have to understand how the public understands manufacturing. Many people still see manufacturing as a dark, dirty and even dangerous industry.

Most students at secondary school level recognise that science & maths subjects could be useful for getting a good job. However, far fewer feel such jobs are attainable or relevant to them. To add to the problem, the profile of those who do go on to study particular Science, Technology, Engineering and Maths (STEM) subjects and pursue certain STEM careers is too narrow. Women, working class and some minority ethnic groups remain under-represented in some disciplines and occupations, particularly in engineering. This not only means a pool of potential talent is being lost, but that those industries are missing out on the many benefits of a more diverse workforce.

Studies show that these groups tend to have limited exposure to the world of STEM, which those with high levels of exposure generally gaining this through family members’ qualifications, occupations and interests. The greater the level of exposure to STEM, the more likely a student is to study STEM subjects post-16 years of age. 

Putting emphasis on the relevant technical skills

STEM subjects are hugely important; however, much of the current technology curriculum for university and college education doesn’t place enough emphasis on the relevant technical skills needed in today’s manufacturing businesses either. The challenge is that new technologies are emerging at an unprecedented pace and the education system is struggling to keep up with it. Often college and university curriculums are running out of date courses and subsequently graduates leave with outdated skills impacting their employability.

If a new technology does emerge, it can take 6-18 months for this to get onto a curriculum aligned to exams by which time the technology landscape will have moved on again. There is clearly a lack of synchronised technical skills training at college and university level which is struggling to keep pace with the accelerated technology change in industry.

Traditionally working in manufacturing meant manual jobs needing vocational skills and on-the-job training through apprenticeships. Over time, industrial engineers and IT professionals have become in demand as manufacturing has become more automated.

Collaborative manufacturing is creating a greater need for up-to-date IT and technical skills. Employers are needing to upskill both entry level candidates as well as existing staff with advanced skills.

Upholding our position as a leading engineering nation

A strong British engineering sector is vital to the long term sustainability of our economic recovery, and increasing the supply of engineers is at the heart of this. As a country we excel in hi-tech industries but we need engineers to make sure the UK stays ahead of our competitors. The rest of the world is not stagnant, so we must do everything we can to uphold our position as a leading engineering nation. The Government’s Engineering UK report finds that engineering businesses have the potential to contribute an extra £27 billion to the UK economy every year from 2022 if we can meet the demand for a quarter of a million new vacancies in the same timeframe.

Businesses and government bodies are already working hard to attract and retain talent within their workforce, but there is always more that can be done to improve the image of the UK’s manufacturing sector and promote the benefits of pursuing a career in this area. With the decision to leave the EU causing increased uncertainty, business and the Government must act quickly in order to keep the UK and the sector an attractive employment option.

Using technology to bridge the skills AND generation gap

To bridge the skills gap, there is a trend for companies to recruit new staff with 50-60 percent of the skills required, as they are unable to find workers with all of the skills required. Employers are bringing these staff into their business with base-level skills and then providing comprehensive training to bring them up to the required level.

At the other end of the spectrum, highly experienced senior managers over 40 years old within the industry, have an immense amount of knowledge to pass on, but can be reluctant to change and be less patient with new technology. 

Modern technology helps recruit and retain new workers, propelling manufacturing to a new era of innovation.  The right technology allows multiple generations of workers to “meet in the middle” and support manufacturing’s transition. As an example, modern enterprise resource planning (ERP) & product lifecycle management (PLM) solutions reinforce the traditional best practices, as well as meet expectations of younger generation users who can get up to speed quickly on best practices and easily obtain critical historical data for reference and training. Employees of all ages have the opportunity to share knowledge with new recruits through the use of collaborative tools.

Continuing to engage with educational establishments

The skills gap is most noticeable in the STEM sector, however it is important not to solely focus on this area. The requirement for a flow of highly talented, creative and original workers into the UK holds the key for the future development of companies across the spectrum.

As employers, we must take steps to narrow the skills gap now. This comprises of ensuring existing employees are up-skilled and being committed to finding new talent, both of which will help future proof businesses. 

Many manufacturers are making great effort to engage with educational establishments, from primary to university level, which is already leading to greater enthusiasm for manufacturing & engineering amongst young people. Additionally, apprenticeships can play a key role in creating a more prepared and qualified workforce, benefitting both the individual and the employer.

Apprenticeships play a role in preparing skilled workers

Apprenticeships can certainly play a huge role in preparing skilled workers whilst offering employers the opportunity to strengthen and diversify their workforce providing a future talent pipeline tailored to the individual business needs.

Apprenticeships offer substantial training and the development of transferable skills. Most training is on-the-job working with a mentor, to learn job specific skills in the workplace. This means that technical skills vital to business performance and growth are gained and strengthened, helping to develop our industry as a whole. Apprenticeships bring opportunity; to attract new talent, offer progression and develop a motivated, skilled and qualified workforce. 

Moving towards employer led standards

In April 2017, a new levy will require all companies that operate within England to pay 0.5% of their payroll towards funding apprenticeships. There is an allowance of £15,000 therefore in reality only companies with an annualised payroll of more than £3M will pay the levy. 

The levy will support the existing frameworks as they move towards the employer led standards. Current frameworks are currently being phased out and are expected to be removed completely by 2020.

To formulate a new Apprenticeship Standard requires 10 companies to design and submit the standard. Only when this has been approved, can it proceed. This standard can then be used by the company who submitted it, as well as every other companies in the UK. The overall idea being that the levy will support the Government's commitment to improving productivity by increasing the quantity and quality of apprenticeships.

Employers need to take a leap of faith and make the extra investment on supporting new applicants, so they can deliver the skills needed for the business and industry in the long term. The levy could be very powerful for closing the skills gap in the manufacturing industry. Some of the investment is a sunk cost which lowers the threshold for making the business case weigh up to recruit apprentices.

The Apprenticeship Levy will not solve all of our skills problems, but a supply of thousands of skilled apprentices every year will make a positive difference. The levy will most definitely help to transform the skills landscape in the UK manufacturing industry.

Making career choices within the sector more inviting

A positive image of the sector portrayed by the media is vital.  Helping to change historic perceptions of the industry will make career choices within the sector more inviting.

In order to accelerate the narrowing of the skills gap, the Government now needs to help businesses by promoting employment on every level. The decision to leave the EU without doubt poses a serious problem for talent acquisition as many businesses source much-needed talent from the EU. Adapting to marketplace changes as and when new agreements are made will be needed to overcome the ramifications of the Brexit vote.

Continued improvement in the co-ordination, quality, reach and impact of engineering outreach activity by the whole engineering community, business and industry is essential. Building on existing programmes is necessary to positively influence the perceptions and subject choices of young people and get more of them interested in a career in engineering. 

Education programmes such as Tomorrow’s Engineers have made it clear that this is best achieved through collaboration and support from local, regional and national STEM employers. Government, working in partnership with business, the education sector and the engineering community, needs to ensure the provision of a national coordinated employer – led, informed and relevant approach to careers inspiration in educational establishments. 

Meeting the forecasted demand

It is not unreasonable then, to think that every child should have an engineering experience that is linked to careers and the curriculum, with all schools and colleges being held to account through their relevant inspection authority.

This should in turn help us achieve the latest Government target of a two-fold increase in the number of Advanced Apprenticeship achievements in engineering and manufacturing technology, which will be fundamental in us meeting the forecasted demand for skilled engineers by 2022.

About the Author - Jess Penny is the General Manager at Penny Hydraulics Ltd.  Shecan be contacted on 01246 811475 or by email at jessica@pennyhydraulics.com.  Find out more about their family business here

 

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