New figures show that there has been a 25% drop in the number of people starting apprenticeships in the first two quarters of the 2017/18 academic year.
The Department for Education has reported that there were 194,100 apprenticeship starts in the first two quarters of 2017/18, compared to 258,800 in the same period the year before.
The drop comes one year after the Apprenticeship Levy was introduced. Business groups have said that the Apprentice Levy system is too complex.
Jane Gratton, head of business environment and skills policy at the British Chambers of Commerce (BCC), said: "The restrictions and complexity around the use of the Apprenticeship Levy have made it more difficult for firms to use them to train staff and plug skills shortages … The Government urgently needs to work with businesses to find ways to make the Apprenticeship Levy work better for everyone and ensure that the UK economy has the skilled staff it needs."
Mike Cherry, national chairman of the Federation of Small Businesses (FSB), said: "The latest drop in apprenticeship starts marks yet another worrying downward trend with fewer and fewer young people pursuing apprenticeships as an avenue to sustainable employment. Today's 16% drop in the number of 19 year-olds starting apprenticeships is not good news. It is a clear signal that big businesses have not gotten to grips with the Apprenticeship Levy, but also that small businesses not paying the levy are struggling to offer opportunities as well."
A new survey conducted by the Institute of Directors (IoD) has found that just 19% of employers that pay the Levy expect to take on more apprentices and only 14% of them think the Apprenticeship Levy is fit for purpose.
Seamus Nevin, IoD head of policy research, said: "The Apprenticeship Levy is not working as intended. The new system was supposed to be employer-driven but the narrow and centrally-controlled design means this is not happening. It is not helping firms to invest in skills and train in a way that best suits the needs of our economy. Many employers are unable to make the complex and restrictive rules fit their specific training requirements."