Apprenticeships (Small Businesses)

Jim Shannon Excerpts

Thursday 9th June 2011 Westminster Hall

[Richard Graham]

I am grateful for that intervention, and I am sure that the Minister will have noted that point and will come back on it in due course.

Developing the themes of our debate today, we now have to consider the obstacles that small businesses face in taking on apprentices. I have touched on the two key areas of bureaucracy and cost. On bureaucracy, the challenge for those of us who want to promote apprenticeships is that there are so many different ways of taking on apprentices. For example, it is generally the case that the training costs for 16 to 18-year-olds are entirely funded by the Government and those for 19 to 24-year-olds are half-funded by the Government. Members will find in their own constituencies that we have training providers who will provide certain training courses for 19 to 24-year-olds entirely free of charge. On the one hand, that gives the 19 to 24-year-olds a competitive advantage, and on the other, it offers to small businesses the opportunity to take on a slightly more experienced individual at a lower cost than might be the case normally.

[Jim Shannon (Strangford) (DUP)]

The hon. Gentleman mentioned two schemes—I think that one of them was for 16 to 24-year-olds and that the other was for 24 to 27-year-olds—but some people lose their jobs and have to retrain. Does he not think that opportunities should be given to those who want to diversify into other jobs? Should they not be given apprenticeships as well, even if they are past those ages?

[Richard Graham]

The hon. Gentleman raises an interesting point about the ways in which we can get people back into work. The Work programme is starting this week. I am sure that he is already in touch with both the contractors and sub-contractors in his own constituency. Working closely with those who are rolling out the Work programme offers the best chances of getting older people back into the workplace. What we are really talking about today is apprenticeships that are focused specifically on the 16-to-24 age group. I acknowledge the hon. Gentleman’s general point, but I think that it ranges wider than today’s debate, although the Minister might want to comment on that.

I will return to the obstacles for small businesses and quote from the NAS in Gloucestershire, which works with hundreds of SMEs on a daily basis. We know that the definition of an SME can include businesses that, on a constituency basis, are really quite large. Companies employing 250 employees are big employers as far as I am concerned, but they are categorised as SMEs. One of the challenges for the NAS, which is resourced by one representative per county, is to engage with the small businesses that we are discussing today, which would technically be called micro-businesses. I do not use the term “micro” because I do not think that companies enjoy being called “micro”—they do not relate to that word. We are talking today predominantly about companies with fewer than 12 employees.

The NAS in Gloucestershire has spoken to more than 15,000 small businesses in the past five months. That is an astonishing achievement, and I pay tribute to its hard work in spreading its tentacles so widely among small businesses in our county. Its experience has shown that it has been able to spread the word about apprenticeships and their role.

As hon. Members have said, the role of the media and further education colleges has also been critical in spreading the word, but it can be very difficult to reach businesses of the size that we are discussing today. Many people

“simply don’t have the time to come out of their businesses”

to attend events. Such companies—often one man, one woman or a family working together—do not have the sort of people who typically sit on the committees of their local Federation of Small Businesses. We are fortunate if we can persuade them to come to an event, a lunch or a supper to discuss topical issues.

There are some breakfast clubs for very small businesses—I have certainly been to them, as have other hon. Members. They are quite good at doing business-to-business with each other, but the process of filling in forms, searching on websites, discussing with training providers and working out whether to go to the further education college or a more specialist training provider is quite time-consuming for people who are dealing with customers minute by minute in their shops.

To try to ensure that very small businesses get the opportunities to incorporate apprenticeships into their companies, the Department and the NAS are therefore supporting projects among group training associations and apprenticeship training agencies. In response to a letter that I wrote him, the Minister highlighted that

“recently, Group Training Association and Apprenticeship Training Agency models have been proving successful in making it easier for small business to take on apprentices.”

I hope that the Minister will share some examples of those successes with us, whether they are geographical or sectoral, and share with us how we can help him to promote GTA and ATA models in our own constituencies, as a way of helping small businesses to overcome the apparent obstacle of administration.

It is true, for example, that the South West Apprenticeship Company in my own constituency is able to provide the legal ownership of apprentices taken on by small businesses should there be future employment law concerns with an apprentice who has not worked out. Many of us will know that the business of finding the right apprentice is the single most important thing and often a very hard thing for a small company to do. As far as employment law is concerned, ownership of the apprenticeship is with the training provider, which can be enormously helpful to small businesses.

The next stage covers what sort of carrots might be offered to very small businesses as part of the incentive to take on an apprentice. I start from the presumption that if we were all able to persuade half the small companies in our constituencies to take on one apprentice each, we would have solved the youth unemployment problem in this country by that step alone. The opportunity, if we were able to seize it, would be enormous. The goal would be considerable, so how can we get closer to achieving it? We could consider two or three things, the first of which is to provide a financial incentive. In March 2010, there was an apprenticeship grant for employer scheme—AGE—which gave a straightforward cash amount of £2,500 to employers taking on their first apprentice. As a result of that incentive, which was offered for a limited period of three months, 5,000 unemployed 16 to 17-year-olds were taken on during that time.

It is right to ask ourselves whether that incentive was entirely motivated by a long-term solution for youth unemployment or by a short-term concern to keep teenagers off the unemployment statistics in the run-up to a general election. It is also right to ask whether cash incentives for taking on a first apprentice, without necessarily a time commitment on how long that apprentice will work, will always generate good long-term results, or whether that is a very short-term way to enhance small business profitability without necessarily leading on to career opportunities for 16 to 17-year-olds, but it is something on which perhaps the Minister might comment today.

A slightly different thought offered to me by the chairman of the FSB in Gloucester was to look at ways to subsidise apprentices over a three-year period. For example, when a company takes on an apprentice for the first time, a percentage of the amount paid by the employer could be reimbursed by the Government at the end of the first year. A smaller amount would be reimbursed in the second year, and in the third year all the cost would be absorbed by the company. That is a slightly different and more interesting model to look at, were the Government able to offer financial compensation for some of the employment costs of taking on new apprentices for small businesses.

Other ways to help small businesses to take on apprentices could be considered. One of them could be to rationalise the training costs for 18 to 24-year-olds as well as 16 to 18-year-olds. The Government have previously differentiated between the two age groups on the basis that getting people started is the most important thing and that, by the time people are 19 to 24, they should have more experience and more maturity to offer employers. But we know that that is not always the case. Some 19-year-olds and older people might still need considerable investment of time and effort by very small businesses to bring them to a stage where they can contribute to the growth of that company. The cost of that investment in time is as important to the smallest companies as the financial cost of paying apprentices for however many hours a week they are employed.

--- Later in debate ---

[Gordon Birtwistle]

I agree. That was to be my next point. A company in Burnley called Aircelle makes thrust reversers for the Trent jet engine. Three years ago the company employed 350 people; it now employs 800 people and has work for 15 years. Aircelle has been offered work from Boeing and other aircraft manufacturers, but has to turn it away because it does not have the skills.

I used to work for the company when it was called Lucas Aerospace, which was a long, long while ago. I walked around the place, and I said to the managing director, “I look at some of the people here and I remember them working here when I did, and I’ve been retired for three years. Some of these guys must be coming up for retirement.” He replied, “The age profile is a big concern because more than 80% of the work force is 40-plus.”

Another big problem for the company is that young people coming into the industry want to be designers and technicians, working on computers on the other side, and the guys who put the aircraft engine parts together are in short supply. It is a problem getting skilled fitters and process workers to come and do the job. The company is now a world leader in composites, but it is very difficult to get people to come and work on composite design and manufacture. Fortunately, it is using a lot of young ladies to do that now; because of the dexterity of their fingers, they are able to mould things in carbon fibre. I agree entirely that this is an issue that the Government must pick up. We must ensure not only that we train people to do the real top jobs but that we train young people to come in and do the jobs that involve physically making things.

As I said, at Burnley college we are having a manufacturing summit on 20 June. The council there has worked with the college. We spent £100,000 from the working neighbourhoods fund, and three years ago the college put in a further £100,000 to buy three Mazak advanced machine tools. The hon. Member for Worcester (Mr Walker) will know of Mazak because the company is based in his constituency. The college ran an engineering course but could not get anyone to go on it, but as soon as we put in the Mazak machine tools the course was overwhelmed, because young people see that they can work in an office and a workshop and design a product, go on a computer and feed the design into the machine, and then make the product on the new CNC—computer numerical control—machine. They can see that it is a great job for the future. The days of what I call the garage on “Coronation Street” with engineers in blue overalls with oily rags in their pockets have long gone.

[Jim Shannon]

They are all on three days a week.

[Gordon Birtwistle]

Are they? They are very fortunate to be on three days. In some of the big companies that make advanced products, food could be eaten off the floor because it is so clean, and young people see that.

An apprentice is an investment. Companies think nothing of spending thousands of pounds on a machine but will then worry about spending a few thousand on training someone to run it. It is important that companies think of apprentices as an investment for the future, because without them they will not have any staff for the future to make their product of the future, and the profits of the future will disappear.

The Government need to carry on with what they are doing. Like my hon. Friend the Member for Gloucester, I am extremely disappointed that we have not seen anyone from the Opposition here today. That is a big disappointment because this is a big issue. They often go on about it in the House, yet when we have a debate like this they cannot be bothered to turn up. Having said that, I hope that the coalition Government will get on with it and complete the course.