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Business Development & Marketing Finance General

Why are businesses not taking advantage of the new apprenticeship scheme?

The Government’s new Apprenticeship Levy scheme introduced two years ago set an ambitious target of creating 3 million new apprenticeships by 2020.
Under the scheme any business with annual payrolls exceeding £3million have had to pay a 0.5 per cent levy on their payroll to the Government which can be redeemed against the cost of staff employed under an approved apprenticeship programme.
But there is now very little confidence that the 3 million number will be achieved. Indeed, the numbers of new apprenticeships have been reducing and in January this year was revealed to be 15% lower than before the system was introduced two years ago.
In May the Public Accounts Committee said that the DfE’s “poor execution” has created “serious longer-term problems” for apprenticeship programmes.
Yet UK businesses have been for some time facing serious problems in finding appropriately skilled candidates for jobs, particularly in engineering, construction and IT. And the OECD has warned that automation will affect more than a million workers, who will need re-training as a result.
The new apprenticeship levy has been variously described as “yet another tax on business”, with an online system for claiming training vouchers that is too complicated to use and with the maximum amount that can be claimed set far too low.
For example, in the engineering and manufacturing sector, the levy caps the possible funding for any single apprentice at £27,000, but some firms say they can spend up to £100,000 for some apprenticeships. To make matters worse, those firms paying the levy must claim their vouchers within two years or lose the money paid under the levy altogether.
Even worse is that some of the standard training programmes are not yet ready, according to the website redflagalert in an article in October last year: “In high-cost sectors such as engineering, construction and manufacturing, the immediate cost needed to set up the new training deters many.”
According to the Financial Times, reporting in January this year: “A survey of 765 levy paying businesses in November by the training body City & Guilds found that 93 per cent had hit some form of barrier preventing them from investing in apprenticeships since the levy was introduced.”
If the larger levy-paying businesses are struggling to implement apprenticeship schemes, then imagine how much of a burden it is for the UK’s many SMEs. Although the Chancellor of the Exchequer this year halved the amount small firms must spend on apprenticeships to 5% the burden of dealing with the online voucher claiming system and finding a suitable training scheme is likely to be far more onerous for already-busy owners and managers than it is for the larger businesses.
Yet another example of a well meant Government policy badly executed without really understanding the way business operates and what it really needs?

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Cash Flow & Forecasting Finance General Rescue, Restructuring & Recovery Turnaround

Construction is a UK economic growth sector – or is it?

There has been some evidence over recent months that the UK construction industry has not been growing as might be expected after a recession. Closer analysis reveals that this is not a uniform picture.
The larger companies involved in big commercial, infrastructure and house building were doing well but seem to have come off the boil recently. Many of the smaller, more local builders have been facing a number of ongoing challenges.
For building contractors the lead time between pitching for and pricing a contract can be lengthy, anything up to two years before a project gets under way. This means that prices quoted are likely to have changed significantly especially when they rely on sub contractors. In many cases this is leading to profit margins being eroded to such an extent that the tendered price is no longer viable.
For the smaller builders, who generally do private work such as extensions and building refurbishment, the issue is the high cost of VAT rates. While there are some aspects of such building work that are VAT exempt, this is a very complex area and usually it applies to development. Much of this is down to home owners who are still finding it difficult to borrow for extensions and refurbishment and their concern about justifying the investment unless it is an alternative to moving to accommodate a larger family.
Another issue for contractors is the availability of specialist sub contractors. The larger single-trade firms working for developers and larger construction companies seem to have more work than they can handle where their problem is finding skilled staff such that dependency on agency labour is eroding profits.
This lack of skills is the result of many skilled people having left the industry which in turn is driving up the cost of labour.
As a result the beneficiaries in the industry are the skilled sub contractors and specialist trades who are able to charge a premium due to the lack of competition.
Certainly anyone providing fixed price tenders needs to limit the time for acceptance so they have the right to reprice the work if there is any delay.

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Banks, Lenders & Investors Business Development & Marketing General Rescue, Restructuring & Recovery

The perils of a narrow focus and its effect on growth

There is always going to be a need for certain skills regardless of technological change yet somehow over the last couple of decades many trades have been ignored or forgotten in the push to get more young people into university.
As a result there is a significant shortage of many skilled tradesmen and women.
One example is the construction industry, both for new building and the maintenance of existing property. We all know there is an urgent need for more housing and that this is fueling a rise in property prices beyond the affordability levels.
For some time now, we have been hearing that local tradesmen such as, builders, plumbers, painters and decorators, are booked up for months ahead. Many jobs and postings on local social media forums ask for anyone prepared to work in the building industry.
This demand is similar for both small and large construction companies, most of which are growing but cannot recruit enough skilled people.
Despite economic recovery, we are in a position where past narrow thinking has led to the possibility that growth in construction risks being stifled by its inability to find enough skilled people to meet the demand. And if a domestic emergency arises with the plumbing this winter it may be a challenge to find someone to deal with it.
What other sectors do you know of that are experiencing similar problems and how are they addressing the skills-shortage problem?