How can apprenticeships benefit UK businesses?

Despite the skills shortages and record low unemployment rates, youth unemployment is 11.6% compared to the national 3.8%.³ The ONS figures for 2021 shows under-employment at 7%, referring to people who are overqualified for their current job, or in work but looking for longer hours or higher pay. Additionally, 2.5 million people are of working age but are economically inactive, having left the workforce following Covid-19.

The apprenticeship model exemplified by Lloyds Banking Group’s investment in its own people, plus the £3m that we’ve invested in SMEs every year through the apprenticeship levy touches these points - it provides for constant reskilling and refreshing of skills in later life to help tackle economic inactivity, and addresses underemployment in young people by creating fresh pathways into high skill high value of work, regardless of the qualifications someone has gained in school.

Apprentices can offer significant value for the businesses they join and to the wider UK economy. In fact, research has shown that for every £1 that is spent on apprenticeships, the national economy gains £21. This is high in comparison to other expenditure/returns on investment in the innovation, research and technology sectors range from around £4 – £7 per £1 spent.⁴

How can apprenticeships benefit employers?

According to the CIPD, apprenticeships can bring a number of benefits to employers. Their research shows that 80% of employers have maintained or improved future skills in the business, while 70% of employers have seen improvements in the goods and services they offer.⁵

Businesses considering starting an apprenticeship scheme may be worried about the initial costs, but research by Centre for Economics and Business has shown that there’s actually a profit in taking on an apprentice. There’s a net gain to the employer while apprentices train, and a higher output once employed. Research from the St Martins Group⁶ found that, taking all costs into account, employers still receive a net positive return on investment during the first year an apprentice is in training. This increases post qualification, and helps to alleviate skill shortages and gaps.

How are apprenticeships funded?

The apprenticeship levy was introduced by Philip Hammond in April 2017 to address UK productivity through investment in skills. Large employers (defined by companies that have an annual pay bill of more than £3 million) in the UK have been required to pay an apprenticeship levy, which is a rate of 0.5% of an employer’s annual pay bill.

Essentially, whilst big companies hold learning and development budgets, half of people working for SMEs get no training after leaving school. Given that nearly 2/3 of the UK workforce are employed by SME’s, this clearly has a long-term impact on the UK’s productivity. The levy on bigger players created a fund to support learning and development across SMEs, and this is how apprenticeships are funded.

Our firm belief in the power of apprenticeships extends beyond our contributions to the apprenticeship levy sharing initiative. For many small businesses, though the funding of levy transfer is crucial, what they value most is having the opportunity to tap into Lloyds Banking Group’s deep knowledge and experience when it comes to apprenticeships, workforce planning and upskilling. We also support all our businesses with further learning facilities in leadership and business growth through the Lloyds Bank Academy, free of charge.

As of 2022 we’d invested £11.9m into the apprenticeship levy, which has helped over 450 businesses and 960 apprentices start their learning journey in critical areas of skill gaps, in industries such as science, technology engineering and digital disciplines; all areas of new job growth and vital for reskilling our country for the future. 

Apprenticeships vs university

Apprentices are more likely to be in employment for longer, and will receive higher earnings than non-apprentice colleagues, with wage premiums of 11% for intermediate-level apprentices, and 18% for advanced-level.³

Although numbers of students at university has risen greatly in the last decade we’ve become more aware of colleagues who, for diverse reasons - be it challenging social or cultural backgrounds, devoting themselves to raising a family - missed out on the opportunity yet always harboured a sense of “what if”?   

Though we see hundreds of colleagues achieve their aspirations through apprenticeships, every story is unique and important to the individual and their families, every apprenticeship is an opportunity for our colleagues at whatever age or stage in their career to test themselves and aspire to become their best. In doing so they become the role models that aspire others in our organisation to look forward, keep developing and helps us embed a learning culture.

The debate of the past few years has sought to compare apprenticeships with a traditional university education – to place one style of learning against another and perhaps drawing us into picking a winner. Increasingly we’ve seen through 2020 that the UK needs to value both systems to provide diverse pathways for our young people who will leave school in increasing numbers across this decade and need diversity of learning environments to be able to thrive and find their place in society.    

The Further Education White Paper⁷ signals an intent to place employers at the heart of skills development, a recognition of regional excellence and diversity and supporting adults in the pursuit of life-long learning.  Apprenticeships, T-levels⁵ and traineeships support different styles of learning, yet for this change to happen, parents and students need support and reassurance from schools, colleges and employers of the value of apprenticeships as a specific destination in its own right.   

Tradition and culture are not easily changed. Our colleague Asim, encouraged by his parents to ‘do the right thing’ and go to university found it was not the experience he’d hoped for. He is now thriving as an infrastructure technician apprentice, a job he might have hoped to apply for on graduation. This positive experience persuaded his parents to allow Asim’s brother to apply for an apprenticeship with the NHS – in which he is also now thriving. For these reasons in National Apprenticeship week we host sessions for students and parents to provide that reassurance so that talented individuals find the learning environment that will suit them best.

Apprenticeships are an integral part of our strategy. By building and developing talent through apprenticeships, Lloyds Banking Group will help reduce the skills gap and Help Britain Prosper.