IMI open letter questions 2020’s £2bn Apprenticeship Levy funds loss

Institute of the Motor Industry (IMI), chief executive Steve Nash has highlighted £2bn in lost Apprenticeship Levy funds as a demonstration of “inconsistencies” in Government’s approach to upskilling the UK workforce.

Here is his letter in full, highlighting the issues for the automotive sector, and the IMI’s proposal to help car retailers claw back more cash to train the next generation of industry talent:

The last 48 hours have seen two significant announcements relating to skills, training and apprenticeships. Firstly, the Queen’s Speech outlined the government’s Lifetime Skills Guarantee, to give everyone access to skills for life.

But on the same day, The Chartered Institute of Personnel and Development released data that showed UK employers have lost £2bn over the past two years in apprenticeship levy funds that they have been unable to spend.

These two announcements – on the same day – bring into sharp focus the fundamental discrepancy in the government’s skills pledge.

They also raise a serious question for us at the Institute of the Motor Industry (IMI) in relation to the up-skilling of the workforce for future automotive technologies – electric, autonomous, connected, etc.

The detail of the Lifetime Skills Guarantee still needs to be fully understood, but we see the option for anybody to retrain at any stage in their life and careers as incredibly good news as the existing automotive workforce transition to the new technologies.

And the ‘Skills Accelerator’, linking employers to their local FE Colleges and Training Providers, could provide some opportunities for employers to attract and develop local talent.

That brings me to the issue of apprenticeships.

It would an amazing achievement if the Lifetime Skills Guarantee could address the inconsistencies in approach to apprenticeships, including the way they are funded across the four nations in the UK.

The IMI, has worked hard to make the new apprenticeship standards in England work. But the new data from the CIPD illustrates that it isn’t working.

Of course, 2020 was a very specific case and the majority of the unspent £2bn of levy funds is unquestionably as a result of the whole training industry being closed for most of the year.

We, therefore, standby our previous call to the Department for Education to allow employers to retain their unspent levy funds in their digital accounts for a fixed period - after which they would be clawed back.

We believe this would encourage a fast re-start to apprentice recruitment which is absolutely crucial for the UK economy as a whole – and the automotive sector in particular.

This money was meant to be used to train apprentices and that’s where it should be focused.

But there is another crucial issue that needs to be addressed for the automotive sector.

Given the size of the challenge automotive has in transitioning to electrification in a very short timescale, the lack of a specific focus on the skills challenge that represents is concerning. 

Yes, the charging infrastructure must be in place – but so must the skilled workforce to maintain, repair and service these vehicles. 

Currently just 5% of the automotive sector is qualified to work on electric vehicles – and the fact that the current apprenticeships across the UK do not comprehensively include skills in diagnosing and repairing ADAS or electric vehicles makes upskilling the sector a mammoth task.

The IMI is working closely with the Employer Panels for automotive apprenticeships to address this issue, but unlike the pace of change expected by government, it is not as fast-moving as the sector needs it to be.

Putting aside the need for the automotive apprenticeships to catch up with technology, right now the focus has to be on simply attracting and supporting new talent to the sector. 

The latest data from the Department for Education shows that automotive apprenticeship starts for August 2020 to January 2021 have been more adversely affected than most other sectors at 53% lower year on year.

And there has been a significant decline in the number of apprenticeships supported by ASA levy funding – 64% lower year on year.

We know from experience that the current skills shortfall will carry forward and continue to affect the sector for many years to come, so constructive use of the unspent levy money now to encourage employers to address the shortfall would make sense.