A major shake-up is imminent—But where is British business?

In the Autumn 2024 budget announcement, the UK government proposed the discontinuation of Level 7 apprenticeship funding, including the senior leader apprenticeship. The decision was made with the best of intentions—to help skill British business for the next round of growth—but it remains short-sighted in its approach by undermining the key skills of leadership and management as central to the growth agenda.

Our research indicates that whilst this move should be sending ripples through British business, raising concerns about the long-term impact on leadership development, productivity and financial stability, it has gone largely unnoticed. Many employers are simply unaware of the impending loss of the levy. From our research, we see more than 75% of businesses and their leaders are unaware of the changes to the levy. Meaning they’ll be missing out on key funding with the impact of this being felt way after this financial year. If one estimates that it takes £50,000 to £75,000 to recruit externally for senior leaders, and companies end up saving over 50% in costs for developing internal candidates, then the cost to British business is likely to be significant.

As British business loses its ability to develop leaders internally, the recruitment costs for 1,000 businesses replacing one senior leader are likely to total over £50 million.

For years, the Level 7 funding levy has been a critical resource for businesses. It allows them to upskill future leaders and foster internal growth. The removal of this funding threatens to undermine these efforts, with significant financial and operational consequences for British businesses. This research will explore the implications of this decision, emphasizing the urgency for companies to enrol staff in these programs while funding is still available.

The Role of Level 7 Apprenticeships in Business Growth

Level 7 apprenticeships, such as the senior leader master’s level program, have played a vital role in developing leadership capacity across industries. The program has enabled businesses to utilise their levy payments effectively to train leaders internally, reducing the reliance on external recruitment and associated costs. The NHS, for example, has relied heavily on this funding to create progression routes, retain talent and improve service delivery.

According to the survey conducted by Hult Apprenticeships at Ashridge, 94% of employers considered Level 7 apprenticeships critical or important to their leadership and management strategy. In the NHS, this number rose to 100%. The overwhelming support for these programs highlights their importance not just for individual organisations but also for the broader economy.

Financial and Productivity Losses: Quantifying the Impact

The withdrawal of Level 7 funding is expected to result in significant financial losses for British businesses. These losses can be attributed to several factors, including:

1. Increased recruitment costs: Organisations will be forced to rely more on external hiring for leadership roles, which is significantly more expensive than developing internal talent
2. Reduced productivity: Without the structured development provided by these programs, businesses may experience a decline in productivity due to a lack of skilled leadership
3. Higher training costs: Businesses will have to fund leadership development independently, increasing operational costs

To estimate the potential loss, consider the following:

• The average cost of recruiting a senior leader externally ranges from £50,000 to £75,000 per hire
• Internal development through Level 7 apprenticeships is significantly more cost-effective, often reducing costs by up to 50%
• If 1,000 businesses need to replace just one senior leader externally due to the removal of funding, the total recruitment cost could exceed £50 million

In addition to direct financial losses, the reduction in internal leadership development pipelines will slow business growth and innovation. For SMEs, which are often more dependent on affordable training options, the impact could be even more pronounced.

The broader impact on workforce diversity and inclusion

One of the most overlooked consequences of the removal of Level 7 funding is its effect on workforce diversity and inclusion. The senior leader apprenticeship has been instrumental in promoting underrepresented groups into leadership roles. At Hult Ashridge, 60% of learners in the program are female, and 40% come from ethnic minority backgrounds. Many learners with additional support needs have also achieved higher-than-average outcomes.

Removing this pathway will disproportionately affect these groups, reversing years of progress in creating diverse and representative leadership teams. Employers have used the program to support women in leadership initiatives, ethnic leadership programs, and sustainability efforts. Without it, the opportunity to cultivate diverse leaders will be significantly diminished.

Strategic Response: Immediate steps for British businesses

Given the impending withdrawal of Level 7 funding, businesses must act swiftly to mitigate the impact. The following strategies can help:

1. Maximise Current Opportunities:

   • Enrol as many staff as possible in Level 7 programs while funding is still available

   • Prioritise high-potential employees who can drive future growth

2. Develop Alternative Funding Models:

   • Explore co-funding arrangements with employees

   • Partner with industry bodies and educational institutions to create affordable training options

3. Invest in Internal Leadership Development Programs:

   • Develop in-house leadership academies

   • Leverage digital tools and simulations to reduce training costs

4. Advocate for Policy Change:

   • Join industry coalitions to lobby the government for continued support

   • Share case studies and data to highlight the value of Level 7 apprenticeships

Case Study: The NHS Experience

The NHS provides a compelling example of the transformative impact of Level 7 apprenticeships. Despite facing significant resource constraints and the pressures of the Covid-19 pandemic, the NHS has used these programs to build a more resilient and capable leadership team. One Trust noted that 60% of its senior leader apprentices were female. This reflecting a conscious effort to develop leaders who better represent their communities.

The Darzi investigation, which examined the performance of the NHS, identified management structures and systems as one of the key drivers of current performance issues. The removal of funded programs to train effective leaders will exacerbate these challenges. With a £37 billion capital shortfall, the NHS’s ability to address transformational challenges will be further compromised without Level 7 funding.

A call to action

The proposed removal of Level 7 funding is a significant setback for British businesses. The financial and productivity losses, coupled with the negative impact on workforce diversity and inclusion, cannot be ignored. Businesses must act swiftly to enrol staff in existing programs, explore alternative funding models, and advocate for policy changes.

Failure to do so will leave British businesses at a competitive disadvantage, with reduced leadership capacity and higher operational costs. By taking proactive steps now, organisations can ensure they are prepared for the next round of growth and continue to develop the leaders they need for a successful future.

Appendix: Estimated Cost Analysis

• Average cost of external recruitment for senior leaders: £50,000 to £75,000
• Estimated cost savings through internal development: Up to 50%
• Potential total recruitment cost for 1,000 businesses replacing one senior leader: £50 million
• Diversity impact: 60% female, 40% ethnic minority representation in current programs