A 21st Century Tool for Business Education and Economic Growth

The Administrative Staff College (now Henley Business School) was founded in 1945 through a partnership between the Civil Service, major businesses and nationalised industries. Its defining purpose was to strengthen the skills of UK managers to support our national economy and society, which was then recovering from the events of the Second World War.

This ethos of support through better management remains core to Henley’s strategy and values today. It is reflected in our apprenticeship programmes, which align with our heritage and current strengths as a triple-accredited business school.

Over 2,300 learners working at over 170 companies have started an apprenticeship at Henley since the launch of our programmes in 2017. Our delivery is driven by the requirements of employers, around which we have built high-quality, impactful programmes that produce results for organisations and learners alike.

We closely monitor market trends and, building on our knowledge and experience as one of the largest higher education providers of apprenticeships, have reflected on the key challenges facing apprenticeships. Our view of these challenges and the steps required in future to support a high-quality market for apprenticeships are outlined below.

Poor productivity has long been a structural weakness of the UK economy. Output per worker lags behind almost all other G7 countries, a gap that has grown substantially over the past two decades.

The need to tackle the country’s weak productivity performance was highlighted as a key rationale for the Apprenticeship Levy when it was announced in 2015 by then-Chancellor, George Osborne. As the best-known form of work-based learning, apprenticeships are regarded by government and many employers as a key part of the answer to the UK’s weak technical skills base, which constrains productivity growth and, consequently, employees’ incomes.

The Levy, along with extensive reform of apprenticeship delivery (primarily via the creation of over 600 employer-defined, occupation-specific apprenticeship standards), has radically reshaped the market. The annual budget for apprenticeships has risen from around £1.7bn in 2016/17 to £2.2bn today, and it will grow again to £2.7bn by 2024/25. Demand for apprenticeships at higher and degree levels has grown rapidly – around one in eight apprenticeships today are at level 6 or 7. The majority of apprentices now are employed by large, Levy-paying employers, a reversal of the situation a few years ago, when SMEs accounted for the bulk of the market.

However, the market faces several key challenges. These include:

• A fall in overall apprenticeship start volumes, especially among young people (such as those under 19), leading to concerns that many young people are missing out on apprenticeships.
• The concentration of employer demand for apprenticeships within relatively few, high-volume standards. Around 20 standards account for half of all apprenticeship starts, despite there being over 600 available to use.
• The risk that the government’s budget for apprenticeships may again come under pressure if the post-pandemic recovery in employer demand for apprenticeships is sustained[1].

[1] It took an unprecedented Covid-driven labour market downturn to reduce large employers’ rate of Levy investment to around 55% of total contributions in 2021, just above the level initially forecast by HM Treasury and the Department for Education when the Levy was developed. Unused Levy funds are required to fund apprenticeship training costs at non-Levy paying SMEs. https://www.theyworkforyou.com/wrans/?id=2021-07-13.32387.h&s=expired+apprenticeship#g32387.r0

In common with most post-16 education and training, apprenticeships have been subject to a high level of policy and funding instability over the past 40 years. Our view is that further radical reform would not be welcome by employers or providers but that instead, greater policy clarity and minor adjustments are required to create the conditions for a more sustainable apprenticeship market:

The direct connection between Levy payments by employers and funding for apprenticeships should remain clear and strong. We work closely with our employer clients to strengthen their strategies for using Levy funds, reinforcing the connection between corporate strategy, organisational development and apprenticeships. We do not recommend the diversion of Apprenticeship Levy funds into other forms of training and education – other public budgets exist for such requirements. Any dilution of the focus of the Levy would be detrimental to the use of and performance of the Levy in delivering effective work-based learning.

We think there is an unhelpful duality to much of the debate about productivity and social mobility within apprenticeships – i.e. that one can be delivered, not both. Socially mobile societies are more productive because they make more effective use of talents from every section of society. Many employers we deal with are keen to secure a diversity of backgrounds and ideas within their workforce because the case has long been established that diversity – such as in terms of ethnicity, gender and ideas – in senior and middle management roles has a key part to play in improving organisational effectiveness. The same should apply in respect of social mobility. The Department for Education appears keen to know the impact of apprenticeships on social mobility, but the measures against which such an impact can be understood are unclear.

Achieving productivity growth via apprenticeships should also bring significant benefits to learners by turning training delivery into people development. But more can be done to ensure that those who could benefit most from high-quality apprenticeship delivery – such as young people or adults in low-paid work – are supported to enter apprenticeships. For young people, this should include:

• A focus on improving progression pathways to apprenticeships for young people. Apprenticeships should be positioned and promoted as progression destinations for learners completing A-levels, T-levels and, where appropriate, HTQs – allowing those with ‘threshold’ competence to progress towards ‘full’ competence. This will require apprenticeship providers to work more closely with other further education and higher education providers, who in turn should be held accountable by Ofsted, the Office for Students and the Department for Education for increasing the number of learners who progress from classroom-based courses to become apprentices.
• Addressing employer hesitancy about recruiting under-19s by permitting greater use of front-loaded apprenticeship delivery models, whereby learners undertake a portion of off-the-job learning in a block before entering the workplace. This would mean that new apprentices could be equipped with relevant knowledge and skills to better enable them to integrate into their new roles.

Current evaluations published by the Department for Education use the salary levels of apprentices as a proxy for improvements in productivity achieved by apprentices. However, while such data is helpful, the time lags in the publication are long, and wages data provides a very partial view of the impact on firm-level productivity[2].

[2] There is extensive research that considers the often-fractured relationship between wages and firm-level productivity. As an example: https://www.ilo.org/wcmsp5/groups/public/---ed_protect/---protrav/---travail/documents/publication/wcms_410267.pdf

The government already recognises the key role that technical skills, focused on STEM sectors, can play in helping to address the UK’s weak productivity track record. However, we believe that equally strong evidence of the role played by management and leadership deserves similar recognition. The government’s analysis[3] clearly clarifies the contribution that better leadership and management can make to firm-level productivity. This has been reinforced by numerous other studies, which highlight poor management practice as a key driver of the UK’s weak productivity performance[4]. The role that apprenticeships play in supporting this deserves more attention from policy-makers and ministers, and should be reflected in future decisions over apprenticeship funding if resources are over-committed.

[3]See the Business Productivity Review: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/844506/business-productivity-review.pdf [4] For example see https://www.mckinsey.com/featured-insights/regions-in-focus/solving-the-united-kingdoms-productivity-puzzle-in-a-digital-age

Government should maintain and further progress its work to:

• Keep apprenticeships as an all-age programme from levels 2 to 7, helping young people start jobs that provide good-quality careers and helping existing workers adapt and upskill to move forward in their working lives.
• Ensure that employers – including SMEs – maintain a financial contribution to training costs if they are to engage with and respect apprenticeship training as a response to the opportunities and challenges their organisations face.
• Further develop its use of technology to continue the positive impact that the Apprenticeship Service is making on market function, supporting an employer-led system.
• Enable employers to continue to determine apprenticeship investment decisions and drive the market demand to which providers should respond.
• Provide certainty to employers and providers that supports the former’s growing demand for higher and degree apprenticeships, especially if coupled with the work underway by the Institute for Apprenticeships and Technical Education to improve the quality and consistency of degree apprenticeships.

We continuously review and improve our apprenticeship programmes, drawing on feedback from learners and employers as well as recent policy developments. As our economy recovers from the pandemic, we are developing a more balanced offer, spanning both pre- and post-experience learners, creating a broader range of high-quality talent acquisition and workforce development apprenticeship programmes that respond to employers’ business needs. Current programme development priorities for Henley include:

Work is underway to further diversify the age and background of apprentices undertaking higher and degree apprenticeships. We plan to build on the policy intent in the government’s Skills for Jobs white paper to grow apprenticeships as an alternative pathway to the traditional three- or four-year bachelor’s degree, particularly for young people. This includes plans to bring together undergraduate and apprenticeship provision to build new work-based pathways to careers – diversifying access routes, reducing youth unemployment/underemployment and developing the future talent that employers require to succeed.

Plans have been agreed within Henley to broaden our apprenticeship portfolio, targeting the delivery of new programmes mapped to digital and business improvement strategy standards in 2022 and 2023, along with a new roster of programmes focused on providing early career professionals (in IT, management and leadership) to employers.

Work is now underway to better understand the outcomes that Henley apprenticeships achieve for employers and apprentices alike. The key metrics used by the Department for Education to measure the apprenticeship market relate solely to inputs and outputs. We are establishing a framework for reporting organisational impact, as well as understanding how best to improve the effectiveness of our apprenticeships in key areas such as social mobility, cohort building and line manager engagement.