A survey by the Association of Employment and Learning Providers (AELP) found that three out of four apprenticeship training providers can "no longer meet demand" because small- and medium-sized enterprises (SMEs) are struggling to offer them, due to a shortage of funding from the apprenticeship levy.
The survey found that this year a quarter of apprenticeship training providers have had to turn away a prospective new SME employer of apprentices, while 17 per cent of providers have stopped recruiting apprentices altogether for new and existing SME employer customers.
A further 25 per cent have had to cut back on apprentice recruitment for their employer customers due to a lack of funding and a third of providers need up to 25 per cent of additional funding on their government funding contract to meet current demand.
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Last month Prime Minister Boris Johnson promised more money for apprenticeships.
Earlier this year it emerged there has been a steep fall in apprenticeships take-up by young people. New starts fell by 19 per cent among 16- to 18-year-olds (from 131,400 to 106,600), and 26 per cent among 19- to 24-year-olds (from 153,900 to 113,700), between 2015/16 and 2017/18.
Mark Dawe, chief executive of AELP said: "It's been over four months since the DfE's permanent secretary told a [House of Commons select committee] that ‘something is going to have to give' unless more funding for apprenticeships was forthcoming and we're saying that the damage is already being done.
"More recently the Prime Minister said that apprentices are ‘indispensable to this country' and that ‘we have a desperate shortage in this country of people with the right skills‘.
"The clear message from apprenticeship training providers is that the shortage will quickly become much worse unless the government delivers quickly on Boris Johnson's funding promise."
The apprenticeship levy - essentially a tax on employers with an annual wage bill exceeding £3m - was introduced in April 2017.
But SMEs do not pay the levy, relying instead on funding being left over from it for their apprenticeships after large levy-paying employers have first taken back their entitlement.
The AELP said it is a particular issue for 16- to 18-year-olds because SMEs who traditionally offer most apprenticeship opportunities to young people.
It added that it warned DfE ministers in 2016 that the levy would run out of money but said the view was dismissed at the time.