London’s business leaders have called for a ‘radical overhaul’ of the Apprenticeship Levy and warned significant changes need to be made to skills and training provision in the capital.

A new report by London Chamber of Commerce and Industry (LCCI) and London Councils found that 42% of businesses that have to pay the Apprenticeship Levy did not plan to use apprenticeship funding over the next year.

An additional 40% of these are expected to spend just half or less.

All public and private employers with a wage bill of more than £3m have had to contribute 0.5% of this expenditure to the Apprenticeship Levy since April 2017.

The Government plans for this to fund the creation of 3 million new apprenticeships by the end of the decade.

The LCCI and London Councils report, entitled London’s Local Business Survey: Assessing the capital’s skills challenge, warned of a skills shortage in the capital.

Of the 1,000 businesses surveyed for the report, nearly half (48%) said they were more likely to employ more apprentices if the candidates were better prepared for the world of work.

‘Skills challenges remain across a wide range of areas, including technical and digital capabilities, while the capital’s firms continue to be concerned about the employability of new applicants – including for apprenticeships,’ said LCCI chief executive Colin Stanbridge.

‘More broadly, we believe that the working of the apprenticeship levy in the capital must be reviewed, to make it far more effective for employers and in terms of labour market outcomes.’

Cllr Clare Coghill, executive member for business, Europe and good growth at London Councils said: ‘The survey helps London boroughs understand the main issues for businesses in the capital, so that we can create the right environment for them to prosper.

‘If local government’s future income is to be linked to business growth, we need to fully understand its drivers and barriers and do all we can to support business and good growth.

‘The focus this year on skills and apprenticeships highlights an area where giving London government more powers and levers could really help business to prosper.

‘An immediate first step would be for the government to work with London boroughs, business and the mayor to reform the apprenticeship levy; allow London to keep any levy underspend and use this funding to support businesses to spend the levy effectively and Londoners to be job-ready when they become apprentices.’