Business leaders have urged the Government to reform the Apprenticeship Levy in order to help solve some of the economy’s underlying challenges ahead of Brexit.

In their submission to chancellor Philip Hammond before the Budget, the CBI called on Whitehall to do more to tackle the country’s skills shortage.

Describing the Budget as an opportunity to set the tone for a post-Brexit economy, the business pressure group said that while investing in capital is ‘vital’, there will not be ‘an inch of progress in tackling the economy’s underlying challenges unless we invest in people.’

The CBI’s submission welcomed the recent reform to the Apprenticeship Levy, which requires all public and private employers with a wage bill of more than £3m to contribute 0.5% of this expenditure. The aim is to fund three million places for apprentices by 2020.

The reform means that levy-paying employers will be able to make transfers of up to 25% to as many other employers as they wish. This enables companies to support training in smaller companies which might not be able to fund apprenticeships.

However, despite welcoming this reform as well as an increase in funding for the National Retraining Partnership, the CBI warned the Levy was still a ‘heavy part of the cumulative burden weighing on firms’ and called for it to be reformed.

The pressure group called on Whitehall to make it easier for small businesses (SMEs) to access Apprenticeship Levy funds by reducing the cap for SMEs from 10% to 5%.

Currently, non-levy paying employers will contribute 10% of the cost of training an apprentice and the Government will pay the remaining 90%. Reducing the cap for SMEs to 5% would make it easier for them to access levy funding.

The CBI also called for the introduction of a flexible skills levy after 2020, to include life-long learning, as well as a doubling of the budget of the Institute for Apprenticeships to £28m to give it the capacity to approve training schemes ‘quickly and efficiently.’

‘As we near the end of Brexit negotiations, the world’s gaze is fixed on these shores. This Budget is a pivotal moment and chance to showcase the UK as an open, collaborative and confident nation,’ said Carolyn Fairbairn, CBI director-general.

‘Entrepreneurs here and around the world need to see a UK committed to harnessing the power of business to innovate and tackle problems, from sustainability to inequality.

‘With skills shortages, uncertainty and the squeeze in incomes on the rise, this couldn’t be a more critical time to plug the drain on the UK’s productivity and deliver prosperity that is shared by workforces and communities across the country.

‘The Government must focus its attention on making the UK a shining beacon of enterprise, at the top of every investment league table and known worldwide as a country that attracts, not deters, capital and talent.’