Briefing from the Federation of Small Businesses
25 March 2009
Members present for all or part of the proceedings:
Ms Sue Ramsey (Chairperson)
Mr Robin Newton (Deputy Chairperson)
Mr Alex Attwood
Mr Paul Butler
Mr Alex Easton
Mr William Irwin
Ms Anna Lo
Mr David McClarty
Mrs Claire McGill
Ms Carolyn Brown ) Federation of Small Businesses
Mr Wilfred Mitchell )
The Deputy Chairperson (Mr Newton):
I welcome Wilfred and Carolyn from the Federation of Small Businesses, and I thank them for coming here today. They are fairly regular visitors to the Committee by now, and we are all the better for that. To date, Members have heard from a wide range of groups.
By the way, I am not Sue Ramsey. She has just arrived. [Laughter.]
I just thought that you had a cold. [Laughter.]
The Deputy Chairperson (Mr Newton):
Chairperson, we have just started the meeting, and the witnesses have not yet given evidence.
(The Chairperson [Ms S Ramsey] in the Chair)
The Chairperson (Ms S Ramsey):
I offer my apologies, and I thank Robin for starting the meeting. Good morning once again. I will hand over to the witnesses now to make their presentation, after which we will have a question-and-answer session.
Mr Wilfred Mitchell (Federation of Small Businesses):
Good morning, and thank you very much for inviting us here today. We sent the Committee a briefing paper in advance of the meeting, and we are happy to answer questions on any issues that arise from it. I will make a few remarks by way of introduction.
The Federation of Small Businesses (FSB) values apprenticeships and recognises their importance to the Northern Ireland economy, particularly in these difficult economic times. We recognise the importance of skills provision for the current and future workforce. Apprenticeships are a very important career-development route. They provide a credible and desirable alternative to university education, particularly in light of the recent calls for increases in student tuition fees, which, if allowed, will put traditional third-level education out of the reach of many young people from relatively well-off families.
However, small businesses experience particular difficulties in engaging with apprenticeship programmes: money, time and red tape. Northern Ireland has the highest concentration of small and medium-sized enterprises (SMEs) — enterprises with fewer than 250 employees — of all the regions in the UK. Around 98% of the private sector in Northern Ireland consists of micro-businesses, which are businesses that have fewer than 20 employees, and nearly 95% employ fewer than 10 people.
Small businesses employ 65% of the private-sector workforce in Northern Ireland and contribute 60% of all private-sector turnover. The FSB believes that the current economic downturn provides an opportunity to establish the right environment for job retention and the creation of good-quality jobs.
In respect of apprenticeships, small businesses can offer a rounded workplace education, a broad range of work, more individual attention and mentoring and, often, more responsibility than the big traditional firms.
Last year, the FSB conducted a survey of over 1000 members in the UK on the issue of apprenticeships. The figures are in our briefing paper, but they are worth repeating. Only 26% said that they employed apprentices on a recognised apprenticeship training programme. Some 20% used their own training schemes, but nearly one third said that they were concerned that employing apprentices involved too much red tape and was too time-consuming and costly.
In addition, 21% said they had concerns about the quality of trainees. Hiring and retaining good-quality apprentices is perceived as a problem. Only 6% said that apprenticeships would not be appropriate to their business. Some 78% said they would employ apprentices if financial support was available from the Government.
The survey also found that many small firms and micro-businesses are largely unaware of what training they can offer and how to take advantage of it. Thus, there is a clear need to promote better the apprenticeship programme itself and the financial-support incentives that are already available to employers. Serious consideration must also be given to promoting the quality of training in apprenticeship programmes.
The FSB strongly recommends greater use of group training associations (GTAs), which are non-profit organisations that provide training and related services on behalf of local employers. That would make it simpler for small businesses to employ apprentices by removing the burden of red tape. Group training associations could cut the employment risk and broaden the available learning by sharing apprentices between a number of SMEs.
GTAs could design and maintain apprentice-training programmes to fit the needs of small businesses; those programmes would preferably be short, affordable and based in the workplace. GTAs could also provide a matching service for employers and apprentices. Consideration should be given to the potential for sector skills councils and current learning providers to act as GTAs.
Only one fifth of Northern Ireland respondents to our latest biennial survey of FSB members indicated that they expected to increase their expenditure on skills development and training over the next two years. Northern Ireland respondents were also more likely to consider a lack of available trained staff to be a barrier to expanding their business — that issue was classed as very important by nearly 30% of Northern Ireland respondents compared to an average of 19% of respondents in the whole of the UK.
We recommend that small businesses be given a financial incentive to take on a new apprentice. That will ensure that there is an adequate wage and training structure for apprentices, which will improve apprenticeship completion levels and increase the likelihood of the apprentice being employed on completion of the programme. We also recommend that apprenticeship training be aligned with the Matrix recommendations and that future markets be identified as well as traditional sectors.
Ms Carolyn Brown (Federation of Small Businesses):
It is worth remembering that the various partners involved in apprenticeships have very different objectives. The Department for Employment and Learning will, no doubt, want to develop skilled employees for future employment in economic development as well as to reduce unemployment. The young people involved will want to gain skills and experience, increase their own employability and develop their careers. We agree with those objectives entirely, and we support the need for a well-trained and available workforce.
However, employers — in particular, small businesses — have not gone into business to be trainers, educators or teachers. They want people who can work in their business, who will know their company inside out and who will specifically contribute to their productivity and profitability, not that of the industry or other employers, and certainly not for the good of Northern Ireland as a whole. Their main objective is profitability; at the moment, however, it is survival, in many cases. Small businesses are prepared to invest, so long as they can see a tangible return.
Other research that the FSB carried out found that small businesses are considered to be very good employers who offer flexible working, and that employees in small firms are much more likely to feel treated fairly by their managers than employees in other firms. Small businesses are a good place for apprentices to train, and more should be done to encourage greater take-up by small and micro-businesses.
Thank you for your presentation and for your paper, which all members have received. Members will now ask questions or comment on your presentation.
Your submissions states that:
“Consideration should be given to the role of Sector Skills Councils and current Learning Providers to act as Group Training Associations.”
Have you had discussions about that with the sector skills councils? Representatives from the retailing sector skills council, Skillsmart Retail, provided evidence to the Committee. They said that they had given some consideration to the establishment of a centre of excellence as a means of providing training. You have provided an example of how a group training scheme could work. How would you take forward your proposal?
Ms C Brown:
We engage regularly with the sector skills councils and the Alliance of Sector Skills Council to discuss various issues. Although the sector skills councils already exist, their licences are being reviewed at the moment. That offers an opportunity for a review of some of their functions, and training could well be one of them. They could make it their objective to identify small employers who could be grouped together, perhaps geographically, so that individual businesses would not feel as if they are acting alone and having to find out everything for themselves. It would be beneficial if there was one place to which they could go for information and assistance with the human resources and management development elements of apprenticeships. Now is an excellent opportunity for them to do that.
The vehicle for doing that would be the sector skills councils.
Ms C Brown:
Learning providers are already involved in the apprenticeship frameworks as well. It is perhaps not for the FSB to decide how such arrangements should be set up, but there are existing institutions that could be adapted.
I am always surprised by the hard statistics that make a big impact, not least the statistics that show that small businesses employ 65% of people in the private sector in the North, but that only 26% of your 1,000 members employ apprentices. I know that figures can be interpreted in more than one way, but that is a stark figure. Our report on apprentices must get to grips with the reasons why so many employers do not take on apprentices. If nothing else, that hard figure removes some of the scales from my eyes.
To follow on from Robin’s question, are you in discussions with the Department for Employment and Learning (DEL) on your proposal for GTAs? Given that there is a structural problem in that so few of your members are taking on apprentices, have you discussed with the Department how the GTAs could provide a mechanism to assist with that problem? To be fair to DEL, as far as Training for Success is concerned, the Minister said that if learning could be applied quickly, the Department would apply it quickly. Given the harshness of those figures, your proposal seems to be one way of doing that.
Furthermore, will you elaborate on the financial incentive for taking on a new apprentice? As the Committee will know, even NIE is indicating that it will not take on apprentices in September, and it is one of the premium employers in the North, with a huge profit base. Given what is happening in the economic market and with apprenticeships, getting to grips with that issue of a financial incentive, over and above the £40 a week, seems to be the way to unlock things.
Ms C Brown:
We have not yet discussed the matter with DEL yet. However, we are engaging with the Department on various employment issues, and we intend to take that issue forward. As you said, the figures are quite stark, and the proposal is one that the FSB has recently begun to promote and lobby for throughout the UK. Therefore, we intend to take it forward shortly.
One of the biggest issues is getting the information on financial incentives to small businesses in the first place. Having said that, we understand that the apprenticeship scheme in Great Britain offers a wage subsidy for every apprentice who is taken on, and that seems to have been well received by employers.
Financial incentives could also be offered at the beginning of an apprenticeship and at various stages throughout, which would encourage the apprentice and the employer to stay together and to keep maintaining the training programme.
No other members have indicated that they wish to speak. Claire, you are sneaking in at the end.
To be truthful, sometimes I do not indicate that I wish to ask a question because my question might be answered in response to other members’ questions.
Do you want to ask a question?
Yes. Also, sometimes I do not indicate that I wish to speak, but then something that is said in response to a member’s question might prompt me to ask a question.
That is fair enough, but members need to indicate to me that they want to ask a question, because there are four or five presentations today, and I need to be careful of the time. Go ahead, Claire.
Thank you for your indulgence.
Forgive my ignorance, but how many GTAs are there? Can you give me an example of a business that the GTA might operate on behalf of? I think that another member already mentioned the comment in your submission that consideration could be given the possibility of sector skills councils acting as GTAs. Is that a new idea? Will it add something or take something away? Will there be a change in structure?
Ms C Brown:
At the moment, not very many group training associations operate in Northern Ireland. There are, I believe, more in Great Britain. One organisation that operates in both Northern Ireland and Great Britain is the Engineering Training Council. There is a sea-fishing organisation, the name of which I cannot remember — perhaps Wilfred can help me out.
Is it Northern Ireland Sea Fish?
Ms C Brown:
No. Anyway, presumably that organisation operates in Northern Ireland and Great Britain because it deals with shared waters. It acts as a group training association and identifies employers, who I presume are its members.
Group training organisations can operate on behalf of businesses that do not necessarily specifically produce engineering components — for example, small businesses that use only one or two machines to manufacture packaging or some other product. Those businesses perhaps do not have enough technology, if you like, to employ an apprentice full time. The benefit would be that an apprentice could go to a packaging business, for example, to learn how to work the computer numerical control (CNC) machine there, and then move to a confectionery business to learn how to work another machine, thereby building up their engineering skills. A central organisation is needed to co-ordinate that type of activity.
However, those organisations are not in place here. You are recommending something new.
Ms C Brown:
They are not common here.
It would work very well in Strabane. [Laughter.]
That was an in-house joke, Carolyn.
Thank you for your very practical briefing. It is interesting that 78% of businesses would take on apprentices if financial assistance was available. It is good to see that that figure is quite high. Do you agree that any financial assistance would need to be of a reasonable level so as to encourage employers?
One of the reasons for my grey hair is that I can remember the very situation that you described arising 20 years ago in the aquaculture industry. I would not have employed apprentices if the incentive had not been so great. Later on, an apprentice was of value because they generated an income in order to maintain their position. I am going back 15 or 20 years, so the problem is not new. Those initiatives existed in the past. I do not know what happened between then and now.
Ms C Brown:
Financial incentives have to be at a level that is attractive. Interestingly, however, when the FSB did some research across the water into an increase in the minimum wage, it was small businesses in particular that supported an increase for young people and apprentices. Therefore, small businesses are prepared to pay for good-quality trainees.
According to my list, nobody else has indicated that they want to ask a question.
I want to take this opportunity, on behalf of the Committee, to thank the witnesses again for their submission and recommendations. You have appeared before the Committee a few times before, and you have been very helpful.