Lessons from Germany & Tees Valley.
Data published yesterday by the Department of Education suggests that apprentices could be facing a tough future. Compared to the same period last year, the number of people beginning apprenticeships across the country has almost halved. While this is presumably because of the hiring freeze triggered by Covid-19, the prospect of firms going bankrupt is also likely to have an impact on people already in training.
Apprentices are particularly exposed to the economic impact of Covid-19 because their training is dependent on the health of the private sector. And this is a particular problem in certain parts of the country.
Not all apprenticeships will face the same challenges because we know that not all industries are equally affected by the crisis. For instance, the largest shares of apprentices are employed in business, health, administration and law – sectors in which many employees can work from home. Perhaps because of this, these sectors have seen a comparatively moderate decline in apprenticeship starts.
But for apprentices in sectors such as retail, manufacturing or construction, the effects of Covid-19 are less clear cut. For all these industries, the numbers of apprentices being hired has more than halved compared to last year.
This is mainly in line with the large share of employees initially furloughed in these industries – an indicator that these sectors are more vulnerable and likely to also suffer from an increase in redundancies and bankruptcies.
Apprentices in Northern England and coastal areas are typically more likely to work in industries with a higher risk of redundancies or furlough. Figure 1 below shows the share of apprentices younger than 25 who started their apprenticeship in vulnerable industries across English cities. While cities such as York and Chatham have more than 60 per cent of their apprentices employed in high-risk industries, in Slough just 33 per cent are.
Source: Department for Education
The Education and Skills Funding Agency (ESFA) has established a set of measures to ensure that apprentices can continue their courses. For instance, by allowing remote training and assessments wherever possible. There is also financial support for training providers.
As a solution for apprentices made redundant, the ESFA says that it will support them to find alternative employment. But many companies will be reluctant to take on new apprentices in the middle of an economic crisis – not only due to the declining demand for labour, but also because training people is resource intensive. Moreover, in places such as York or Chatham where a lot of apprentices are facing redundancy, it will be more difficult to find them an alternative employer.
So how could the Government encourage companies to take on apprentices during this crisis, particularly in struggling areas?
One possible solution is the grant scheme just launched by the Tees Valley Combined Authority. Their new Employer Grant for Apprenticeships gives generous benefits to small and medium sized businesses (SMEs) hiring new apprentices aged 16 to 20. The grant covers 100 per cent of wages for the first 6 months of employment and 50 per cent after this for a maximum of 2 years. To be considered for support the business must be operating in one of 10 selected high-growth sectors, such as advanced manufacturing or logistics, and be located in the Tees Valley Area.
Further afield, the German Government is giving companies, particularly SMEs, financial incentives to keep apprentices in training and offer enough new apprenticeships for young people next year. Vocational training is an important pillar of the German education system and the Alliance for Training and Further Education has now agreed on a comprehensive set of measures. To help redundant apprentices. For instance, businesses that hire apprentices from firms that have gone bankrupt will get a bonus. Other bonuses are earmarked for SMEs that hire the same number of apprentices as in the three previous years (€2000/£1800). The bonus is even higher for SMEs employing more apprentices than they hired prior to the crisis (£2700). In total, these activities are expected to cost the German state more than half a billion euros but will help prevent their vocational training system collapsing.
Centre for Cities has already laid out that an employment and skills scheme must be at the heart of any recovery programme launched as response to the Covid-19 crisis. But the varying geographic damage that a collapse of vocational training could have to people in some areas suggests that there may also need to be additional support for existing schemes, and both the approaches from Germany and the Tees Valley set out two good ideas that should be considered by policy makers across the UK.
 The reference period is 23 March – 31 May 2019. The Department for Education states that these data are provisional data until final data will be provided in November 2020.
 These broad categories encompass a large share of industries classified as either vulnerable and very vulnerable: Construction, Planning and the Built Environment; Engineering and Manufacturing Technologies; Leisure, Travel and Tourism; Retail and Commercial Enterprise.
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