Tuesday 11 February 2020 6:19 am

Don’t dismiss the apprenticeship levy — it could fix the UK's productivity puzzle

Daisy Hooper is head of policy at the Chartered Management Institute.
head of policy, Chartered Management Institute

The UK economy is not what it was 50 or even 20 year ago. We are an economy driven by services, data, and technology.

As such, we need skilled managers to run the teams and operations that keep UK businesses at the forefront of innovation and change.

The apprenticeship levy is a brilliant tool for businesses to develop those skilled managers. However, there is significant public misunderstanding surrounding the benefits it can bring. 

Criticism has been directed at businesses which use these funds to reskill and upskill existing management staff. Some have suggested that such training could have been funded from the employers’ professional training and development budgets. 

This is a misguided and limiting interpretation of what the apprenticeship levy can achieve. 

Our economy needs skilled, agile, adaptable leaders who can tackle anything from new trade deals to the impact of artificial intelligence, which will create — and in some cases are already creating — fundamental changes to the way we work. 

Managers will be at the forefront of implementing these changes, and to be effective they need the right skills and knowledge. As such, using apprenticeship levy funds to invest in managers and ensure that they obtain the right attributes is a wise move.

Investment in management and leadership development at every level is crucial to tackling the UK’s productivity problem. Just last week, it was reported that our productivity growth over the past decade has been the slowest for 250 years. 

A key driver of low productivity is the lack of management skills — especially in SMEs. Anyone who has ever worked for a bad manager can attest to this — it’s frustrating, demotivating, and ultimately leads to employees doing the bare minimum to get by. Better leaders mean better workplaces and happier, more productive employees. 

It’s not just about individuals. Rather, this change can impact the productivity of the organisation — and, indeed, the country — as a whole.

Strong leadership and management practices — such as effective monitoring, setting targets, incentivising performance, and continuous improvement of operations — have been shown to be strongly correlated to firm-level productivity. These are often the stepping stone to businesses adopting other productivity improvements, such as digital adoption and better working practices. 

Right now, UK firms compare badly to international competitors on management skills. At a time when we have a renewed spotlight on the world stage, we should be investing in and showcasing the wealth of leadership talent that Britain has to offer. Good managers will be the driving force that keep us internationally competitive.

Finally, better management training could help address the significant productivity gap between areas of the country. The government has committed to “levelling up” the regions to address this, but a top-down national strategy driven by Whitehall may not be enough. Regional employers have the best knowledge of what they need, and the apprenticeship levy empowers them to make those changes.

The UK needs excellent management and leadership capabilities to thrive in the increasingly uncertain world we live in. And if the apprenticeship levy can be used to achieve that goal, we should embrace it. Yes, the levy needs reforming to ensure that more SMEs can access the training. Clarity on how we define apprenticeships — and the many levels they are offered at — is also necessary. But we must be careful not to undermine the flexibility and employer-led nature of what is on offer. 

Done right, the apprenticeship levy can be used to diversify the leadership pipeline, build capacity in key sectors of the economy, and address the UK’s persistent productivity gap.

Main image credit: Getty

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