Employer investment in training plummets 28% since 2005, putting the Government’s ambition of a high skill, high wage economy at risk, report warns


29 04 2022


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Employers across the UK are investing less in training, with those with the lowest qualifications missing out. This is the finding of a new report by Learning and Work Institute, which shows the Government’s aim of developing a high skill, high wage economy is being put at risk. Marking five years since the introduction of the Government’s apprenticeship levy, the report argues for a new ‘Super Skills Tax Credit’ to support levelling up.

The apprenticeship levy, a payroll tax on large employers used to fund apprenticeships, has failed to tackle long-term declines in employer investment in training. The amount employers invest per employee has fallen 28% since 2005, with UK employers investing only half the EU average per worker. Investment by many firms is limited to statutory requirements like health and safety, and employees qualified to degree level are three times more likely to receive training than those with no qualifications.

Employer training is associated with higher pay and productivity. Low and falling employer investment in training limits our chances to grow our way out of the cost of living crisis and deliver the Government’s ambition of a high skill, high wage economy. It also puts at risk levelling up and social mobility goals, as workers with the lowest qualifications are least likely to access training and the opportunities it brings.

Raising the bar: Increasing employer investment in skills

The report comes after the Chancellor’s pledge in his Spring Statement to look at ways to support employers to invest more and improve the apprenticeship levy. It finds that Government policy has been subject to almost constant chop and change over recent decades, and often now reinforces existing inequalities rather than tackling them.

Government support for employer training amounts to £6.8 billion per year. This includes welcome new support to gain an A level equivalent qualification and growth in higher apprenticeships. However, the number of apprenticeships for young people starting their careers has fallen significantly and 63% fewer adults are improving their literacy and numeracy each year in England than a decade ago.

The report argues that we need a bigger ambition to level up opportunity and increase the amount employers invest in training. It concludes that the Chancellor should introduce a new Skills Tax Credit. Modelled on the successful R&D tax credit, this would allow employers to deduct 230% of the cost of apprenticeships and accredited training from their tax bills, with a Super Skills Tax Credit allowing 300% of training costs to be deducted in priority levelling up areas.

Alongside this, the apprenticeship levy should be reformed to allow spending on the essentials like literacy and numeracy and other qualifications, with new local partnerships looking at how to improve growth and productivity. These would be key elements of long-term plans for growth underpinned by financial incentives for firms to invest in training and a clear framework to engage more employers.

Stephen Evans, Chief Executive of Learning and Work Institute
The best employers invest in their people. But low and falling employer investment in training is holding back our economy. Changing this can improve the prospects of future pay rises to tackle the cost of living crisis and help with levelling up growth and opportunity. We need to do more, including reforming the apprenticeship levy and introducing a new Super Skills Tax Credit, to supercharge skills in the UK.
Graham Hasting-Evans, Chief Executive of NOCN Group
We need a long-term plan for skills and a balanced skills system that supports young people, those that need extra support, adults that need to re-train and employees that need up-skilling for digitisation and green skills. To deliver all of agenda we need a sustainable and adequate level of funding, such as a new Skills Tax as well as reforms to the Apprenticeship Levy.