Plans to axe funding for Level 7 accountancy apprenticeships could see UK accountancy firms move highly-skilled professional work offshore and is at odds with the government’s growth agenda, ICAEW has warned.

The Institute says the government’s proposal to remove levy funding for Level 7 accountancy or taxation apprenticeships risks significant unintended economic and social consequences, including a detrimental impact on the UK job market.

Removing funding for accountancy at the grassroots level would also be “illogical” as accountancy has been identified as a key growth-driving sector in the government’s new industrial strategy, ICAEW says.

Just this week, the government reiterated that, aligned with its industrial strategy, employers will be at the heart of its skills reforms, which it says will introduce greater flexibility to employers and learners in England and create routes into good, skilled jobs in growing industries.

As the Level 7 apprenticeship programme is rarely used to upskill existing staff, each new start effectively equates to a new UK job. Removing funding would therefore reduce the talent pool available to companies, ICAEW says, and could also have a negative impact on socioeconomic diversity across the accountancy profession. 

With 85% of learners coming from state school, Level 7 apprenticeships play a pivotal role in driving social mobility by offering an accessible pathway into the profession for people from all backgrounds.

Since the introduction in 2017 of the Apprenticeship Levy – which employers with an annual pay bill of more than £3m pay at a rate of 0.5% of their bill – the number of school leavers entering accountancy has doubled. In 2022/23, there were 9,600 Level 7 accounting and taxation starts, with 79% of ICAEW apprentices aged 24 or under. 

ICAEW members have already expressed concern that removing Level 7 apprenticeship funding will mean that fewer UK training roles are created. Instead, organisations are likely to turn to offshoring to replace UK training roles, ICAEW predicts. 

Already, the cost effectiveness of outsourcing to countries such as the Philippines, South Africa and India has seen a huge rise in use of outsourced accounting services by firms. ICAEW’s most recent analysis of the mid-tier accountancy market found that the number of chargeable hours offshored by firms using such models has increased by 86% over the past three years, with a further 71% increase in use of offshoring expected over the coming three years.

Alan Vallance, ICAEW Chief Executive, says: “We’re deeply concerned that the impact of removing levy funding for Level 7 apprenticeships will be damaging for professional and technical skills in the UK economy and have a far-reaching impact across accountancy and other growth-driving sectors. 

“The unintended consequences include the loss of highly-skilled domestic training roles to offshoring – which our members and employers tell us is a very real possibility – a widening skills gap and reduced social mobility. All these factors risk diminishing the ability of UK businesses of all sizes to help achieve the fastest growth in the G7.”

Vallance says ICAEW fears that detrimental reform could result in new jobs being lost, which would severely undermine the government’s pledge to boost economic growth. “We urge the government to reconsider this proposal so that young people can continue to access Level 7 funding in order to gain vital skills, essential to the growth of the UK’s wider economy.”