Apprentices add £7 billion to economy within a decade

New modelling suggests apprenticeships are key to tackling Britain’s productivity gap

England’s flagship apprenticeship programme is on track to boost growth and productivity with every year’s cohort of apprentices contributing almost £700m a year to the economy within a decade, according to new modelling by the Chartered Management Institute (CMI).

Analysis of the current English model of apprenticeships, introduced in 2016, found that apprentices qualified in 2019 are projected to add £7bn to the economy by the end of 2029, based on an initial training investment of £2bn - a 300% return on investment.

CMI also found that each business using higher level management apprenticeships saw average productivity gains of £7,000 per apprentice over the course of the apprenticeship.

CMI data found apprentices in the private sector received on average a 17% pay rise of nearly £7,000 through their management apprenticeship.

The apprenticeship scheme is funded jointly by contributions from larger employers and government through a levy system designed to tackle chronic under investment  in professional and technical skills to meet shortfalls in the UK labour market. The scheme  was created to offer a better match between apprenticeships and the skills that employers need while supporting people of all ages, backgrounds and skill levels to gain higher level training based on clear standards.

The analysis also found:

• 71% of management apprentices are from families where neither parent went to university, signalling that they are supporting social mobility.
• 39% of CMI management apprentices are from a low socioeconomic background (compared to 36% in the UK labour force as a whole and 27% in higher education).
• One third of apprenticeships are degree level and CMI data indicates that management degree-level apprenticeships lead to in excess of 20% productivity gains.
• 97% of CMI management apprentices said they were more committed to upskilling the people who work for them, helping to ease the UK’s long-standing underinvestment in training. UK employers currently spend half of the European average on employee training.

The new evidence of the productivity gains of the levy-funded system comes amid calls from some in both business and public life for it to be watered down into a general training fund, a move that CMI warns would risk not just the drive towards a higher skill workforce, but also would likely mean that more of the funds are spent by fewer, larger employers.

Anthony Painter, Director of Policy and External Affairs at CMI, said:

The flagship apprenticeship programme is doing what it was meant to do - helping employers to be more productive and effective. Highly skilled apprentices are increasing productivity and building a culture of continuous learning that the economy and public services sorely need. Some ask for the apprenticeship levy to be diluted or even ditched altogether. If we are serious about growth and productivity this would be an enormous error.

The current system of apprenticeships is giving people at every stage of their career the chance to learn while they earn and equipping employers with the skilled talent pool they need.

There are definite improvements to be made, especially in helping smaller businesses to take full advantage of today’s apprenticeships, reaching more young people, cutting the paperwork burden and ensuring all parts of the country benefit even more. Fundamentally though, any changes made need to be about making apprenticeships work better for more people and businesses rather than radical upheaval which could jeopardise the enormous impact they are having for apprentices and their employers.

We recommend the creation of a ring-fenced Apprenticeship Opportunity Fund, paid for through the levy system, to help underserved groups and businesses to access and progress through apprenticeships, including SMEs, young people and those from under-represented backgrounds to cover all levels of apprenticeships. In other words, we need system improvements rather than radical overhaul.