The UK must significantly increase its skills investment beyond plans for the apprenticeship levy if it is to compete with European rivals in the post-Brexit world economy, according to a new report.
The government’s new apprenticeship levy will not bring employer investment in skills up to levels seen before the financial crisis, according to the Institute for Public Policy Research (IPPR).
Employers in the UK spend £5.1bn less on training in real terms at today’s prices than it did a decade ago, according to IPPR analysis, before the financial crisis caused a big drop-off in business investment of all kinds.
British productivity levels have lagged behind other developed countries since the financial crisis, despite GDP growth that has outpaced every other G7 developed nation.
Productivity in the grew for four quarters in a row for the first time in more than five years in 2016, but growth still lags behind competitors such as Germany, with the Bank of England blaming a “fat tail” of less productive firms counteracting the big improvements of firms closer to the technological frontier.
Britain’s employers spend half the amount per employee than the EU average for continued vocational education, according to the latest European Commission data from 2010.
The UK government has identified productivity improvements as one of its signature economic policies, with chancellor Philip Hammond announcing a £23bn national productivity investment fund during the Autumn Statement, mainly targeted at infrastructure improvements.
However, the government’s attempts to address the lack of investment in skills have been criticised, with the apprenticeship levy slammed as a “stealth tax” by business groups after an independent report by the Institute for Fiscal Studies (IFS) found most of the payroll tax would not be used for training investment.
Hang Ho, regional head of philanthropy at JP Morgan, which backed the research, said: “It is critical that the UK workforce has access to a wide range of skills which are relevant to the labour market and that bolster the long-term health of the UK’s economy.”
The IPPR advocates a “skills levy”, replacing the apprenticeship levy with a broader scheme that incentivises companies to invest in training beyond apprenticeships.
Clare McNeil, IPPR associate director for work and families, said: “Britain’s economy can’t survive outside the European Union without bringing investment in skills into line with our competitors and making sure employers are making better use of workers’ skills.”