Apprenticeship starts are down by 61 per cent after the introduction of a levy, according to new analysis.
Provisional figures for 1 May to 31 July 2017, which is the first quarter after the levy was introduced, showed apprenticeship starts fell to 43,600 from 113,000 over the same period in the year before.
The financial advice apprenticeship received approval last year, with funding of £9,000 available, but the Personal Finance Society has said two cohorts of apprentices had to be put on hold due to confusion over the government funding.
Keith Richards, chief executive of the PFS, said the appetite and demand for apprenticeships will grow over the next few years, despite reports that numbers are down compared to last year.
He said: “The new levy has caused some temporary stalling by large employers, which has contributed to the drop, coupled with confusion earlier in the year about government funding allocation levels.
“The PFS has seen unprecedented demand for its newly launched ‘Aspire’ apprenticeship programme but has had to delay the start for some training cohorts due to uncertainty over the funding allocation.
“Some smaller training suppliers have also deferred implementation until funding becomes available next year.
“However, the clearly evident demand for financial planning and need for succession provisions will drive future demand for apprentices even higher.”
Figures released by the Department for Education and the Office for National Statistics revealed that in the previous quarter there was a 47 per cent year-on-year increase from 118,800 in between February and April 2016 to 174,100 in the same period this year.
The findings were published in the 28-page report on further education and skills in England, which also revealed that year on year, the number of apprenticeship starts at intermediate level has dropped by more than 10 per cent.
While the overall number of starts dropped by 2.5 per cent, from 503,700 in 2015 to 2016 to 491,300 in 2016 to 2017, based on provisional full-year data that reduction is largely due to a 10.1 per cent drop in intermediate level starts.
Neil Carberry, managing director for people policy at Confederation of British Industry, said: “This disappointing data will come as no surprise to companies, who have repeatedly made clear that the current design of the apprenticeship levy system is not effective.
“Businesses believe in apprenticeships but there can be no argument now - reform of the levy system is needed urgently to ensure its success.”
He added firms are still having to adjust to the new system against difficult timescales, but the challenges of the levy run deeper than just a timing issue.
He said: “There is still time to get the levy right but this needs real urgency.
“The government must invest now in the Department for Education’s commercial skills, work with firms to build a better understanding of how businesses will react to policies, and empower the Institute for Apprenticeships to challenge underperforming aspects of system design.”