The number of new apprentices in Wales, which are seen as vital to helping to upskill the Welsh economy, is facing a cliff edge loss of around 10,000 next year unless the Welsh Government plugs a huge financial hole caused by the loss of European funding.
Umbrella bodies representing the apprenticeship sector in Wales, Colleges Wales and the National Training Federation for Wales (NTFW), have outlined their funding concerns in a joint letter seen by BusinessLive Wales, sent to their respective members and Welsh Government officials. It warns that the Welsh Government’s flagship apprentice programme could be slashed by around a quarter (24.5%) next year.
As well as seeing a significant reduction in apprenticeship starts, they said it would also result in job losses across the sector and a number of training companies collapsing. The sector is a collaboration between employers, colleges and contracted training companies. who share in Welsh Government funding.
While the Welsh Government has yet to finalise departmental funding for its 2024/25 financial year commencing next April, with a draft budget being published next month, it said it is facing a significantly challenged funding outlook with its block grant from the Ƶ Government contracting in real terms when factoring in inflation. Talks between the apprenticeship sector and the Welsh Government are continuing.
However, concerns of a cliff edge emerged after it is understood civil servants shared a slide with industry representatives that failed to highlight the loss of European funding of around £42m for 2024/25. Industry figures had believed that the 3.56% projected contraction had accounted for the loss of European Social Fund (ESF) backing. A 3.56% cut was seen as a challenge, but manageable a year out.
In the current financial year the Welsh Government’s overall apprenticeship programme, which comes under the portfolio of Economy Minister Vaughan Gething, is worth around £156m. The funding to providers covers the August to July academic year. With the Welsh Government financial year running from April to March, it means that the current funding pot will be part-financed (three months) from an indicative commitment from the Cardiff Bay administration’s 2024-25 budget.
To put the loss of 10,000 new apprentice into context latest available figures show there were 20,000 in 2021-22.
If the former EU contribution is not made up, the Welsh Government’s budget for apprentices next year would fall to around £118m. This would see new apprentices being disproportionately impacted as colleges, employers and training companies would have a duty to continue to support apprentices already in the system.
The letter, signed by chief executive of College Wales, David Hagendyk, and strategic director of NTfW, Lisa Mytton warns: “The impact of these proposed cuts will result in circa 10,000 fewer starts on the Welsh Government’s flagship apprenticeship programme in 2024/25. The reductions will fall disproportionately on young people (16-24), those in the lowest socio-economic groups and women.
"The analysis also indicates that it would likely also mean a significant reduction in the number of black, Asian and minority apprenticeship learners. Key priority sectors will be most impacted, including crucial recruitment into the health and social care sector. Other areas to be adversely affected with include construction and engineering, both essential to future growth.”
The letter says a 24.5% cut, if realised, would also result in a significant losses in the sector, with some providers having to fold.
It adds: “Early modelling suggests that there will be nearly 200 job losses from within the professionally registered work-based learning workforce, and an estimate that at least eight sub-contracted apprenticeships providers operating in specialist and niche provision, would cease to trade, causing further job losses.”
In the Welsh Government’s emergency budget in October it pointed to a £17.5m saving in its apprenticeship programme for 2023-24, because of a lack of demand in the previous year.
However, the letter says: This is simply not the case. In fact, there has been no reduction in demand for new apprenticeship starts, with Welsh Government published data showing an increase in apprenticeships starts in the first half of 2022/23, compared to the same period a year earlier.
"The reasons for the programme underspend in 2022/23, was a legacy of the pandemic, business decisions because of Brexit and inflationary pressures and impacts of changes in the qualifications systems. In short, there is no lack of demand from employers for apprenticeships. In fact, we expect a significant increase in demand from employers in 2023/24 which, if we could support, reflects well on the outlook for the Welsh economy.”
A Welsh Government spokesperson said: “A Welsh Government spokesperson said: “The budget position for 2024-25 remains challenging and we will work collaboratively with the apprenticeship network to maximise delivery within the available budget. We intend to publish full details of our spending plans when the Welsh Government publishes its draft budget in December.”
Ian Price, director, CBI Wales said: “The development of people’s skills is a priority for businesses in Wales. While these are difficult times financially for the Welsh Government, they need to deliver a fully funded skills programme
to make sure Wales keeps pace with the needs of a modern economy. Wales risks losing its prized talent to other nations without substantial investment in colleges and private sector training providers. With two new free ports, investment zones and plans to decarbonise the Tata steel works in Port Talbot, we need a highly skilled workforce for Wales to seize the growth prizes on offer.”
Head of the FSB in Wales, Ben Cottam, said: "Our recently-released report on small businesses and skills shows the vital importance of meeting the skills needs of SMEs to mend gaps and develop specialisms to grow businesses.
" A well-developed and highly skilled workforce must be central to any plans for growing our economy. It’s imperative therefore that there is sufficient resource available which not only meets that need, but supports the ambition of businesses and the aspirations and opportunities of the employees within them.”
“We have long warned about problems caused by the fragmentation and confusion of effort on skills and economic development following the withdrawal of EU funding. It is important that wherever the funding comes from, it is made available to providers to meet the needs of the businesses they engage with to provide programmes that are responsive to the needs of business such as apprenticeships.
“Freeports, potential investment zones or indeed the growth potential of a local plumbing business all depend on the availability of apprenticeships and suitably qualified employees. We need clarity on exactly what will be available to meet that need.”
The Ƶ Treasury received around £122m in 2021-22 from Welsh employers through its Ƶ-wide applied Apprenticeship Levy. However, it is estimated that only a third of apprenticeship learners came from levy paying employers in Wales. This highlights a deficit between what they pay in what they get back in Welsh Government support - which receives an Apprenticeship Levy Barnett Formula consequential.
