The introduction of the controversial apprenticeship levy caused a collapse in the number of people starting the training programmes, government figures have confirmed.
Final Department for Education (DfE) data show that in the May to June quarter following the levy coming into force in April, the number of people starting apprenticeships fell by 59.3pc to 69,800.
The levy requires all employers with an annual wage bill of £3m or more to pay 0.5pc of their staff cost into an apprenticeship fund. Businesses can then draw on the fund - which is topped up by the Government - to finance training.
The Government has set a target of 3m people starting apprenticeships by 2020 as the country faces a chronic skills shortage. The decline in the final quarter of the 2016/17 academic year will do little to inspire confidence that the goal is reachable.
Despite the plunge, the number of people signing up for apprenticeships in the whole academic year was 494,900, a decline of just 2.8pc on the previous year.
The DfE admitted that the hit to the number of apprenticeships was likely a direct result of bringing in the levy, which is expected to raise about £3bn a year. Announcing the final data it said: “It may take time for organisations to adjust to the new funding system, and so it is too early to draw conclusions based on apprenticeship starts since May.”
Over 21,000 apprenticeships have been launched with backing from the levy since it was introduced, according to the data.
Trade body EEF, which represents the UK’s manufacturing industry, the traditionally home of apprenticeships, blamed confusion around the levy for the decline, calling it “complex and time-consuming”.
Verity Davidge, EEF head of education and skills policy, said: “We’ve heard stories from companies who have hit a brick wall trying to get levy-supported apprenticeships off the ground - and not for a lack of trying. The numbers speak for themselves.”
She added: “Companies are having to tell would-be apprentices they can’t take them on because they can’t get support from the levy in time.
“That sends a dangerous message about apprenticeships when we’re trying to promote them to solve the skills shortage.”
The Budget did little to ease employers’ worries, with Chancellor Philip Hammond saying he would “keep under review the flexibility that levy payers have to spend this money”.
Ms Davidge added: “This was a golden opportunity to fix employers’ concerns about the levy the Chancellor gave no concrete promises.”
Companies struggling to understand the levy were behind the drop, according to Neil Bentley, chief executive of WorldSkills UK, which promotes vocational training.
He said: “There’s a lag effect. Businesses are trying to get their heads around how it will work. The levy is a huge incentive, but businesses are taking their time to make sure they invest properly in it.”
Mr Bentley said he was “confident” that once the levy beds in, industry will embrace it.
The news came as the TUC union claimed apprentices were being “cheated” out of the minimum wage.
Research by the union found 135,000 apprentices in England are being paid less than the statutory rate, which for those under the age of 19 and those in the first year of their training is £3.50 per hour rate.
The Budget announced that from April the minimum rate would be lifted to £3.70 per hour.