Growth and skills levy: A catalyst for the UK pharmaceutical industry?

The pharmaceutical industry is an integral part of the UK economy, developing and manufacturing medicines and vaccines that improve patient care and drive productivity growth. The industry invests more in research and development than any other sector,[i] and it supports 126,000 high-quality jobs[ii] across all regions and nations of the UK.[iii]

These jobs require a range of skills developed through education and work-based training, and many require qualifications that take years to achieve. Access to a highly skilled workforce is therefore vital to attracting investment from the global pharmaceutical industry – alongside a competitive operating environment.

The UK’s world-leading universities make skills a strong suit in our offer to global investors.[iv] That said, surveys of ABPI member companies show that the pharmaceutical industry faces many skills gaps that limit its ability to invest in the UK.[v] Rapid technological developments are also changing the way industry operates, meaning the need for new and diverse skillsets is greater than ever. Addressing these challenges is crucial if the UK wants to unlock the full potential of our industry and progress the government’s missions to grow the economy and build an NHS fit for the future.

This blog explores how the government’s Growth and Skills Levy can help to achieve this ambition by making education and training more accessible while building on the success of apprenticeships in the life sciences sector.

What is the Apprenticeship Levy?

Since being introduced in 2017, the Apprenticeship Levy has raised over £21 billion of funding from employers across the UK.[vi] These funds have enabled a significant increase in spending on apprenticeships in England, rising from £1.5 billion in 2017/18 to £2.5 billion in 2023/24.[vii] As a result, apprentices have become more common in the life sciences sector, with the number of new apprenticeships started per year increasing by almost 7 per cent between 2018/19 and 2022/23.^[viii]

Demand for apprenticeships among learners has also increased[ix] as more careers have become accessible via an apprenticeship.[x] The growth of degree apprenticeships has played a key role in driving this trend by providing a vocational route to gaining university qualifications and entering high-skilled, well-paid jobs. These include jobs in the pharmaceutical industry, such as laboratory scientists and supply chain managers, as well as jobs in the NHS, such as nurses and doctors.

Taking this all into consideration, while the Apprenticeship Levy does need reform, the Growth and Skills Levy’s default position should be to maintain and build on the parts of the current system that are successful.

Why is the Apprenticeship Levy changing?

While apprenticeships are an invaluable route to developing skills and gaining qualifications, they are not always the best fit for everyone. For instance, someone in the middle of their career who wants to improve their data and digital skills may prefer to take a short training course instead of spending one or more years doing an apprenticeship.

Many industries, including the pharmaceutical industry,[xi] called for the Apprenticeship Levy to change so employers could fund other types of training, such as shorter, modular courses focused on upskilling and reskilling staff, in addition to apprenticeships.

In response, the Labour Party’s election manifesto pledged to replace the Apprenticeship Levy with a more flexible Growth and Skills Levy.[xii] After being elected, the new government began setting up Skills England, a new public body responsible for administering the Growth and Skills Levy. Skills England will also assess the UK’s skills needs and decide which non-apprenticeship training courses employers can fund using the Levy.

What are industry’s priorities for the new Levy?

Firstly, the Growth and Skills Levy should build on the success of apprenticeships in the life sciences sector, keeping these important vocational routes into the pharmaceutical industry open for future learners.

The government has recently suggested it may exclude all level 7 apprenticeships (equivalent to a master’s degree) from the Growth and Skills Levy to ease pressure on the apprenticeship budget in England.[xiii] This concern is understandable given the current state of public finances. However, the amount of Levy funding invested in level 7 apprenticeships has been stable since 2020/21, averaging 9.5 per cent of annual apprenticeship spending in England.[xiv]

Level 7 apprenticeships are a crucial component of the UK’s skills offer to global investors. Data from the Office for Life Sciences (OLS) shows that just 8 per cent of the life sciences sector’s apprenticeships are at qualification level 7, while 70 per cent are between levels 2 and 5. ^[xv] Although limited in number, level 7 apprenticeships play an outsized role in growing the life sciences sector and delivering the Industrial Strategy. For example, the ‘Through Life Engineering Services Specialist’ and ‘Post Graduate Engineer’ apprenticeships provide vital vocational routes for developing the skills used to manufacture medicines. If these apprenticeships become less accessible, the UK risks not realising the full potential of the £520 million Life Sciences Innovative Manufacturing Fund to foster regionally dispersed economic growth.

Feedback from ABPI member companies also suggests that excluding all level 7 apprenticeships could reduce social mobility in the sector by forcing employers to rely more heavily on university graduates to recruit roles that require advanced qualifications.

That is why the ABPI is recommending the government take a more selective approach that retains some level 7 apprenticeships, using the skills needs of the Industrial Strategy’s growth sectors – including the life sciences – as a guide to decide which to keep.

Secondly, the government should work with industry at the earliest opportunity to add shorter, non-apprenticeship training courses to the Growth and Skills Levy. The ability to invest Levy funds more flexibly was a key selling point of the new Levy system to industry, as it will allow employers to respond more rapidly to emerging skills needs that arise from new techniques or technologies like artificial intelligence.

To begin with, Skills England should prioritise adding short, modular courses that develop skills in high demand among employers in the Industrial Strategy’s eight growth sectors. For the life sciences sector, we have suggested that Skills England focus on short courses that develop the following skills:

• Data and digital skills, including data analytics, data literacy, and artificial intelligence.

• Core skills, including communication, teamwork, and project management.

• Mentoring skills, including a short new course for staff mentoring apprentices designed to improve the quality of apprenticeship provision and increase completion rates,^[xvi] creating a virtuous cycle of learning and development.

What opportunities lie ahead?

The ABPI, in partnership with the Futures Group, will soon co-launch a sequel to the Life Sciences 2030 Skills Strategy that will demonstrate the sector’s potential to create tens of thousands of new jobs across the UK if we get the conditions for growth right.

A highly skilled workforce, coupled with a competitive offer to global industry, is crucial to creating those conditions, and the ABPI looks forward to working with the UK government and devolved administrations to realise the full potential of the Growth and Skills Levy to do so.

By Oliver Buckley-Mellor, UK Competitiveness Senior Policy Manager

References 

[i] Office for National Statistics, ‘Business enterprise research and development, UK: 2022’, February 2024, available here.

[ii] Office for National Statistics, ‘Industry Census Data 2021’, December 2022, available here.

[iii] Association of the British Pharmaceutical Industry, ‘Pharma Impact Map’, June 2024, available here.

[iv] Office for Life Sciences, ‘Life sciences competitiveness indicators 2024’, July 2024, available here.

[v] Association of the British Pharmaceutical Industry, ‘How skill requirements are changing’, June 2023, available here.

[vi] House of Commons Library, ‘Apprenticeships policy in England’, October 2024, available here.

[vii] House of Commons Library, ‘Apprenticeships policy in England’, October 2024, available here.

[viii] Office for Life Sciences, ‘Life sciences competitiveness indicators 2024’, July 2024, available here.

[ix] St Martin’s Group, ‘Overcoming Barriers to Opportunity: Stimulating Growth and Unlocking Supply in UK Apprenticeships’, September 2024, available here.

[x] House of Commons Library, ‘Apprenticeships policy in England’, October 2024, available here.

[xi] Manufacturing 5, ‘Advanced Manufacturing: Powering the UK economy’, November 2023, available here.

[xii] Labour Party, ‘Labour Party Manifesto 2024’, June 2024, available here.

[xiii] FE Week, ‘All level 7 apprenticeships will be axed, skills minister suggests’, November 2024, available here.

[xiv] UK Parliament, ‘Written Question 15014: Apprentices: Taxation’, November 2024, available here.

[xv] Office for Life Sciences, ‘Life sciences competitiveness indicators 2024’, July 2024, available here.