The apprenticeship levy makes UK employers with an annual payroll of more than £3 million pay 0.5% of the total on training. It was rolled out as part of the previous government’s pledge to create three million more apprenticeships by 2020. But because of bureaucracy, and rigidity, the number of apprenticeship starts is actually falling.
Business schools have spotted a potentially lucrative opportunity, and are piling in. Some 40 of 113 UK universities have created MBA courses specifically to profit from the levy, according to a survey by education magazine TES. More than 1,400 students will enrol in these courses this year.
Last year, Cranfield School of Management created an executive MBA specifically for the levy in partnership with accounting firm Grant Thornton. The first UK business school to tap into the new legislation, the move was described as a “no-brainer for business” by Professor Paul Baines, then director of the Executive MBA program at Cranfield University.
Dr Martin Bicknell, director of teaching and learning at Henley Business School, says: “Appropriate, and imaginative solutions to the apprenticeship levy provide significant opportunities for business schools.
“It provides a new source of revenue, but also the opportunity to think afresh about teaching methods, process, and resources, and the integration of work-based learning into academic programs.
“Done well, all of these benefits can be transferred into non-apprenticeship programs.”
Henley runs a raft of management courses for levy-paying companies, including with the professional services firm EY. Cohorts range in size from 20-50 and the courses enrol professionals from all stages in their career.
The levy only affects 2% of UK companies, but those who are smaller can still get 90% of the training costs towards an MBA covered by the government, but only up to £18,000. The usual cost of a UK course is £24,000, and this rises to more than £80,000 for the top schools.
There are some drawbacks for companies using levy cash on MBAs, such as giving them up to 20% of their week off to study. But the big benefit is to improve productivity—where the UK has lagged behind its European peer economies. A study by the Office for National Statistics found that even a 0.1% rise in management effectiveness could boost productivity by nearly 10%.
“Improving productivity is undoubtedly critical for both policy makers and levy payers,” Martin says. Being productive today requires “exemplary management and leadership; this is one of the reasons why educating managers is critical to productivity gain”.
However, critics argue that business schools are a controversial option for companies to spend their levy cash. The policy is widely believed to have been introduced to get more youngsters into work—the traditional definition of an apprentice.
“I understand some of the concerns raised in relation to using the apprenticeship levy to fund management training, but this is misguided,” says Simon Finley, associate dean at Aston Business School. “The levy should be used to fill skills gaps for the benefit of the economy, and society, and there is a managerial skills gap.”
Simon believes that many people are “not promoted because they are good managers” but because “the only places to promote them to are, generally, management positions”.
There has also been a “significant underinvestment in skill development for too long”, he adds. “There is just as big a need to upskill UK management skills as there is the entry level workforce. At the end of the day, what good will a highly-skilled workforce be if we don’t have the organizational and leadership skills to exploit this effectively?”
Far from damaging social mobility in the UK, Simon believes it can make high-quality management training accessible to everyone. “MBAs can be exceptionally expensive, making them the domain of the privileged and the elite,” he says. Aston this year established an executive MBA for apprentices that matches the £18,000 levy tariff.
The bigger question for business schools is whether the levy is adding more students, or simply shuffling them around, away from other courses such as executive education. “It is a double edged sword; while degree apprenticeships, for example, create a potential new market of students, it draws from the same, finite pool of school-leavers,” says Simon.
For some schools, such apprenticeships are “more a replacement for or alternative to traditional academic programs rather than an opportunity to grow its student population”.
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