The Apprenticeship Levy has been a source of persistent frustration for UK hospitality since its introduction in 2017. The mechanism — a 0.5% payroll tax on employers with annual wage bills above £3 million, held in a digital account to be spent on apprenticeship training — was designed to incentivise employer investment in workforce development. For the hospitality sector, it has instead created a situation where large operators contribute significant sums to a fund they cannot fully access, while the bureaucratic complexity of the system deters smaller operators from engaging with it at all.
The joint submission from UKHospitality and the British Institute of Innkeeping, published this week, quantifies the problem with figures that have circulated in the industry for several years but have not previously been compiled and presented collectively. The sector's annual levy contribution is estimated at £262 million. The sector's annual levy drawdown — money spent on approved apprenticeship training programmes — is estimated at between £78 million and £85 million. The gap, approximately £180 million annually, flows from hospitality employers' accounts to fund training in other sectors.
Why Drawdown Is Low
The reasons for the low drawdown are structural rather than motivational. The hospitality sector is characterised by a high proportion of small and medium-sized businesses — individual pubs, independent restaurants, small hotel groups — that fall below the £3 million wage bill threshold and therefore do not pay into the levy directly but are entitled to co-investment support. Accessing that support requires navigating a system that many small operators describe as too complex, too slow and too prescriptive to be worth the effort relative to the training benefit received.
For levy-paying operators — the managed pub groups, the large restaurant chains, the hotel companies — the problem is different. The approved apprenticeship standards for hospitality roles have historically been narrow in their applicability, slow to update and poorly aligned with the actual training needs of a dynamic sector. The Level 2 Hospitality Team Member standard, for example, covers a broad range of skills at a relatively basic level; operators who want to fund more specific training — in pastry, in bar management, in kitchen leadership — find that approved pathways either do not exist or are not relevant to their operational context.
What Reform Would Look Like
The UKHospitality and BII submission calls for three specific changes. First, an increase in the proportion of levy funds that hospitality employers can transfer to their supply chain and smaller operators in their sector — currently capped at 25%, proposed to increase to 50% — which would allow large operators to direct their unspent levy to fund training at the independent businesses that supply or franchise with them.
Second, a simplification of the co-investment process for small businesses, reducing the paperwork burden and allowing more training providers to enter the market without the current volume of regulatory compliance that limits supply.
Third, a faster pathway for new apprenticeship standards to be developed and approved, with a hospitality sector working group empowered to propose and test new standards rather than waiting for the Institute for Apprenticeships and Technical Education's standard review cycle.
The Department for Education has indicated that it is reviewing the levy framework as part of the government's wider Skills England development, with a consultation expected later this year. UKHospitality and the BII have requested direct representation on the sector engagement panel for that consultation.
The full joint submission is available on the UKHospitality website.