UK Manufacturers Report Slight Relief in Recruitment but Urge Apprenticeship Levy Reform

In the latest quarter, manufacturers in the UK have reported a slight improvement in filling job vacancies, with 35% of firms succeeding in securing the majority of their required workforce, up from 26% in the previous quarter. Despite this progress, the industry continues to grapple with a chronic skills shortage, which remains the primary obstacle to hiring new staff. The majority of manufacturers are advocating for a reform of the apprenticeship levy to address this enduring issue.

During the third quarter (Q3), an unprecedented 88% of manufacturers actively sought new employees, marking the highest recruitment drive of the year. However, just over 20% of these businesses managed to fill all their open positions, a slight decrease from the second quarter (Q2). Notably, less than 2% of companies were unable to fill any roles, indicating a considerable advancement compared to earlier in 2023.

While the number of applicants has seen an uptick, the challenge lies in the dearth of candidates with the necessary technical expertise. This shortage has become more pronounced over the year, with 61.7% of companies identifying it as the main reason for their recruitment difficulties.

Amid these hiring challenges, there is a push from businesses for changes to the apprenticeship levy system. According to Make UK’s Q3 HR Bulletin, firms are keen for the HM Treasury to earmark unspent levy funds for an Employer Training Fund. This would enable companies to invest in essential upskilling and retraining initiatives beyond traditional apprenticeships.

Small and medium-sized enterprises (SMEs), which fall outside the levy’s scope, are seeking additional financial aid from the government. This support could take the form of direct training funding or specific incentives for apprenticeships, facilitating access to more skilled workers.

Data from HM Revenue and Customs (HMRC) reveals that businesses contributed £3.6 billion to the apprenticeship fund last year, a figure significantly higher than the budget for apprenticeships in England by nearly £1 billion. Manufacturers argue that this surplus should be allocated to meet their additional training requirements.

Jamie Cater, Employment Policy Lead at Make UK, highlighted the concerns of manufacturers regarding the ongoing skills gap and the management of the apprenticeship levy funds. Despite a decrease in immediate labour shortages, the decline in apprenticeship starts is causing frustration. Cater emphasised the need for the surplus funds, collected through the levy, to be utilised effectively for apprenticeship training. Make UK’s proposition to the HM Treasury includes using these excess funds for targeted apprenticeship incentives, assisting employers in attracting the apprentices they need to fill skill gaps.