Government's new apprenticeship levy will hit jobs, warns CBI chief

Unless there are some changes, it is inevitable there will be significant job losses

Carolyn Fairbairn says government policies could undermine jobs and growth (Mark Pinder)

Thousands of jobs could be lost following the introduction of a new apprenticeship levy, according to the new head of the Confederation of British Industry.

Carolyn Fairbairn, director general of the CBI, also warned that the levy was now one of the most pressing issues facing businesses – even more than EU membership, which the organisation has lobbied to keep.

The new apprenticeship payments, along with the introduction of the national living wage and pension auto-enrolment, could also lead to skills shortages as fewer companies offer new jobs.

The criticism of the Government’s flagship policies come as a survey by the CBI revealed that less than half of all businesses plan on increasing their workforce next year because of the new high costs. The organisation warned that the slowdown could hit economic growth, and revealed that half of service sector firms said they would raise prices because of the impact – with one in four saying they would employ fewer staff.

On the apprenticeship levy, Ms Fairbairn, in an interview with The Sunday Times, warned: “There is a gulf in the Government’s understanding of what it is doing here and the impact on sectors like retail and its most vulnerable employees.”

The apprenticeship levy, to be introduced in 2017, is a 0.5 per cent tax on all companies with a payroll exceeding £3m, which is hoped to raise £3bn by 2020.

Ms Fairbairn added: “Unless there are some changes, it is inevitable there will be significant job losses among workers who would have been paid the national living wage.”

The new wages will see over-25s earning at least £7.20 an hour, rising to £9 an hour by 2020. However, businesses have complained that this could severely cripple balance sheets – particularly at retailers, who are major employers of low-paid workers.

The wage change will cost businesses more than £1bn, official advisers estimate.

Last month, The Independent revealed that many retailers, such as Tesco, House of Fraser and Morrisons, have agreed to pay staff under 25 the same as those over 25, although some, including WHSmith, Sports Direct and Asda, have said they will either not offer pay parity or have yet to decide.