UK MBA Courses are Booming Thanks to the Apprenticeship Levy

Government policy could reinvigorate business schools, and spark a renaissance for British management. But critics say schools are exploiting the levy by cashing in on money some say is meant for training school-leavers

Traditionally, apprenticeships were a way to train youngsters in manual trades like mechanics or engineering. But a growing number of UK employers are using apprenticeships to train hundreds of executives, in a move that advocates say could reinvigorate the business schools that train them, and spark a renaissance for British management.

It’s all thanks to the UK government’s apprenticeship levy, which makes all big employers (with a wage bill above £3m) set aside 0.5 percent of their payroll for apprenticeships. Business schools have spotted a huge business opportunity, with 40 out of 113 UK universities creating MBA courses specifically to take advantage of the apprenticeship levy, according to a poll by TES, the education magazine.

Some recent courses include Aston Business School’s Executive MBA that was created to tap into levy funds, and the University of Exeter’s MBA-style senior leader degree apprenticeship. 

How do MBA apprenticeships work?

MBA apprenticeships are open to UK residents, with the fees directly paid for by their employers. Companies can spend up to £18,000 of their levy cash on MBAs, below the typical tuition fees of UK courses, which can be as high as £80,000 at the top institutions. But many of the new programs have been made cheaper to fit the levy’s funding limits.  

More than 1,400 people would enroll in levy-friendly MBA courses in the 12 months from May 2018, the TES survey showed.

However, these programs are controversial because many people still associate apprenticeships with training ‘school-leavers’ — young people just graduating from secondary school. Critics say business schools are exploiting government policy by cashing in on tuition fees, and that this could lead to a proliferation of overqualified managers. 

Yet the levy’s backers say improving management skills and practices is key to boosting Britain’s poor productivity record — one of the levy’s key aims. Research by the Office for National Statistics found a 0.1 percent rise in management effectiveness led to a 9.6 percent increase in productivity. 

“Management apprenticeships have a critical role to play in solving the UK’s productivity puzzle” and managing the increased uncertainties caused by Brexit, says Alison Cox, head of apprenticeships at the Chartered Management Institute (CMI). 

It is estimated that poor management costs the UK £84bn per year in lost productivity. 

Kate McNamee, Alliance Manchester Business School’s head of global marketing, communications and recruitment, says: “While some may perceive it as a controversial way of spending levy money [on MBAs], it’s the investment blueprint for a brighter future.” 

Around 10 percent of those who joined Alliance Manchester’s part-time MBA in January 2019 were studying via the apprenticeship levy. Also, the school runs a dedicated MSc Management Practice course that is fully-funded by the levy. 

There are many reasons why employers are investing in MBA apprenticeships. One of the biggest benefits is that training can help to attract and retain staff — a big concern currently, with one in three British businesses worried about maintaining quality teams in the next two years, according to a YouGov survey for Alliance Manchester. Despite that, a third of businesses admitted to offering no formal professional development for their employees, even though 74 percent of employees say it’s an important factor when deciding whether to quit.  

“Investment in people is worth every penny, and it helps businesses grow from a foundation of knowledge,” says McNamee. CMI research found that professionals who have attained Chartered Manager status add, on average, about £400,000 in value to their employers every year. Some of the MBA apprenticeships lead to Chartered Manager status. 

And with the UK workforce aging, upskilling and reskilling older employees is a business necessity, not a luxury, says Cox. 

Advocates say the levy could also make a business education attainable for the many, not the few. 

Cox points to the Chartered Manager Degree Apprenticeship (CMDA), on which students earn a bachelor’s degree in business management. According to the CMI, more than half of those taking CMDA programs are women and two in five come from the most deprived areas of the UK. “Degree apprenticeships can widen participation and boost social mobility,” says Cox. 

But the apprenticeship levy has been criticised by UK business groups for being too complex and too rigid. Companies want more flexibility in how they spend the money; currently they have two years to use it or lose it to government coffers, and can only send staff on approved programs that meet stated cost and content requirements. 

The YouGov/Alliance Manchester study found that 29 percent of employers that are aware of the levy, see it as a tax on business. 

Apprenticeship starts have been declining since the levy was introduced in 2017. They fell by a quarter in 2017/18 year-over-year, which dealt a blow to the government’s target of creating 3m more apprenticeships by 2020. Employer groups insist this target is now unlikely to be met. 

Still, Daniel Prior, director of the Executive MBA (apprenticeship) at Cranfield School of Management, sees the apprenticeship levy as an opportunity for business schools. The levy has created substantially more demand for programs and it has encouraged much closer relationships between universities and industry, he says. 

From 2017, Cranfield’s EMBA has been run in partnership with Grant Thornton, the accounting firm. Uptake has come from a wide range of businesses, including Aviva, EasyJet, BP, Rolls Royce and Severn Trent Water. 

As of May last year, 15 percent of apprenticeship levy spending had been on higher level programs, including master’s degrees. Total revenues from MBA apprenticeships were expected to exceed £26m by May 2019, which would be about 1 percent of the money raised, according to TES. But with more companies embracing apprenticeships for senior managers, not just school-leavers, that seems likely to increase, and the traditional perception of apprenticeships looks bound to change.

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