Why apprenticeships may be one of the keys to increasing UK productivity – The London Economic

Why apprenticeships may be one of the keys to increasing UK productivity

By Steve Winder, regional vice president for Epicor Software, UK and Ireland

Whilst George Osbourne’s recent productivity plan focuses on boosting growth and productivity in the UK, the skills gap is an issue that needs tackling with urgency. Despite the increasing number of third-level graduates, the specific range of expertise required to fill medium skilled jobs is severely lacking. For example, car giant Bentley recently struggled to fill 160 positions due to a lack of skilled staff. There is a critical need for intermediate professional and technical skilled workers if the UK is to reduce this skills gap and subsequently increase productivity. With this in mind, there is a strong case for high quality apprenticeship schemes – especially in sectors such as engineering, manufacturing and construction where high-level skills are of paramount importance to the UK’s productive capacity.

However, the government has recently taken steps to tackle this, pledging to introduce a training levy on large employers to encourage the creation of apprenticeships so that there are 3 million schemes in the UK. Underinvestment in apprenticeships, and more general skills training, has become a trend over the past 20 years and needs to be reversed to ensure that both the quality and quantity of training is increased. According to figures published by the Department for Business Innovation and Skills, there was a 13.7 per cent decrease in apprenticeship starts in the 2013/14 academic year compared to 2012/13, with barely one in ten 18 year olds going on to an apprenticeship. Whilst this decrease may be down to a change in demographic trends, no doubt the recession impacted the financial viability of firms to invest in apprenticeship schemes.

Yet with the government’s assistance, companies are more likely to secure a return on investment. This is bolstered by research which shows that, in addition to increased labour in the workplace, apprenticeships offer a number of financial benefits to a company – particularly within the engineering and manufacturing sectors who typically experience productivity gains of over £20,000 per annum. More generally, each apprentice is estimated to deliver an average positive net gain of £1,670 per annum to their employees.

Providing that organisations focus on delivering quality and structured training when taking on apprentices, the benefits of apprentice schemes are likely to exceed beyond purely financial gain for both the employer and the employee. Whilst university is a first choice for many school leavers, 58.8% of graduates are ending up in non-graduate jobs, according to research by the CIPD (Chartered Institute of Personnel and Development). This is likely to be down to a variety of reasons, but potentially signifies a disjunction between the skills graduates possess and the skills that employers demand – a disjunction which illustrates that the skills gap is still an issue that needs addressing.

With this in mind, it is evident that the demand for technical and professional skills has never been higher amongst employers. Apprenticeships enable employers to target the development of practical and technical skills and capitalise on the increased IT knowledge and capabilities of the new generation of young adults. This is particularly significant as organisations are increasingly making use of technology to streamline day-to-day operations, for example, adopting modern enterprise resource planning (ERP) platforms which give them the ability to analyse business conditions to develop improved business plans, monitor and measure progress and provide the visibility into day-to-day operations.

Whilst the imposed levy will no doubt make apprenticeships a more attractive opportunity for firms, the quality needs to be sustained if apprenticeships are to have the desired effect on productivity and prove an attractive option for school leavers. David Cameron recently announced that companies bidding for government contracts worth over £10m will be expected to demonstrate a clear commitment to apprenticeships, proving a step in the right direction when it comes to ensuring quality training schemes. Whilst the levy on large businesses who train apprentices isn’t expected to be introduced until April 2017, the proposal has ignited an important discussion regarding the impact of these schemes on the economy and more specifically, the UK’s productivity.

It is evident that this generation has the right skills to be used as a firepower to push the growth that the UK needs, it is just a process of attracting individuals into these careers and establishing the training opportunities to ensure that their skills are utilised to most effectively benefit individual organisations and the economy more generally. It is now imperative that the government’s proposals become a reality to ensure the desired effect on the skills shortage and UK productivity.

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