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Small businesses in England have the potential to double the number of apprenticeships they hire, if the government gets its support and incentives right, the Federation of Small Businesses (FSB) has said.

The FSB's report found government reform to be at a "make-or-break" moment, with small businesses critical to achieving the overall target of three million new apprenticeships by 2020. The report demonstrates the potential of smaller firms to help meet the target, but also presents some major challenges, which need to be addressed to achieve it.

One in four FSB members (24%) already employ an apprentice, but a further quarter (24%) would consider taking one on in the future. If this reflects the situation of the rest of England’s 4.7 million small firms, there is potential to deliver well over a million new apprenticeships with smaller employers.

Among the barriers to achieving this is a change which requires small businesses to contribute towards the cost of training their apprentice. This is expected to result in a fall in the number of businesses offering apprenticeships. To limit this, FSB is calling on the government to provide a more generous small employer incentive than is currently proposed. This will ensure extra support is appropriately targeted at the smallest firms that can least afford the extra upfront costs of taking on an apprentice.

Mike Cherry, national chair of the FSB, said: "Smaller businesses are taking on more apprentices than ever before. What's more, a quarter of our members say they are considering employing an apprentice in the future. This presents a huge opportunity and is great news for vocational training, which has become an increasingly attractive option for young people put off by the rising cost and uncertain returns of a university degree.

"We are at a make-or-break moment. We need the government to hit the right balance between incentives and support. While many small firms are committed to apprenticeships, many more continue to be worried about the time and personal commitment required.

"Ministers need to focus on three main areas: more targeted and localised information for businesses with high growth potential, specific and practical guidance on how a smaller company can take on an apprentice, and a more generous package of incentives and support for those which do. Getting this right is key to the successful reform of the apprenticeship system."

Critique and contribute

The FSB's report found that small businesses are most likely to recruit apprentices from outside the business, with 79% of its members doing so. It also found that apprenticeships in two thirds (67%) of small businesses lead to longer-term employment once training is complete. These findings show smaller businesses providing a reliable pathway into full-time employment for their apprentices.

Cost-effectiveness was cited as a key reason for taking on an apprentice (37%), but increased financial burden was the reason many abandoned the idea altogether. Another key motivation in taking on apprentices was a commitment among small business owners to giving young people opportunities.

Challenges to taking on an apprentice included a perception that school leavers did not have the skills needed by businesses, with 32% saying that quality of apprentices was a major challenge. A third (31%) worry about the day-to-day management on top of their other commitments. And over a quarter (26%) said they did not have the time to properly train an apprentice.

The FSB has recommended the government set up a group of 100 small businesses to critique and contribute to future apprenticeship policy. The government is expected to outline some spending plans for apprenticeships from April on Friday 12 August.