Apprentices can deliver up to 300% return on investment

The results of a two year project to prove the value of apprentices in the automotive sector (released today) have provided definitive proof that vocational training does not have to be a cost burden to business and, therefore, can play a vital role in reducing young jobless numbers. 

Conducted by the Institute of the Motor Industry (IMI) and co-funded by the UK Commission for Employment and Skills, the research is the result of a two year IMI project to ascertain the level of return on investment of, and make the economic case for apprenticeships.  Breaking the myth that apprenticeships cost firms money, the research shows that, by the end of their third year, a well-recruited apprentice can generate between 150% and 300% return on investment, based on a £50 hourly charge out rate.  This means that for every £1 invested, the business nets between £1.50 and £3.00.  Furthermore, apprentices who start with no experience typically generate profit within 18 to 24 months– much earlier than was previously assumed.

‘The results from our recent study show, overwhelmingly, that there is a clear financial return to a business investing in an apprentice programme’ explained Steve Nash, CEO, the IMI.  ‘With the motor sector playing a crucial role in the economic recovery – as illustrated through the sustained growth in new car sales – we believe it is vital that motor dealers and garages invest now so that they have the right skills for when the new cars sold in the last 12 months or so start to come in for servicing and repairs.  As such, we believe this is a fantastic opportunity to tackle the continuing young jobless numbers.’

The study looked at a cross section of businesses from micro independents to franchised dealers across the whole of the UK and involved 30 apprentices. There were 5 key benefits identified as a result of the study:

• The productivity of an apprentice was found to follow an “S-curve”, showing low skilled, low level growth in the first year accelerating through the second year and delivering the same return as an experienced technician by the third or fourth year. By the end of the third year of an apprenticeship, for a £50 hourly charge out rate, an apprentice can generate between 150% and 300% return on investment  – this means that for every £1 invested, against apprentice expenses, the business nets between £1.50 and £3.00.
• Apprentices typically generate profit within 18 – 24 months – this is based on an apprentice who has no experience and is essentially non-productive at the start.  If an apprentice has some experience, and is able to be productive from the start, they can pay their way much sooner – often in the first few quarters of the apprenticeship.
• Home-grown apprentice-trained technicians outperform market-recruited technicians.
• “Growing your own technicians” through apprenticeships reduces long-term recruitment and training costs.
• Apprentices learn company best practice and culture from the start – helping to ensure a better fit with the team and internal processes.

‘Our research proves that businesses must overcome their doubts about employing young people and invest in the future if our industry is to continue to succeed as a whole’, added Steve Nash. ‘With the right attitude and support of the employer, giving a young person suitable opportunities to apply their skills, a positive return on investment can be achieved much earlier than commonly perceived.  We are sure this principle can be applied in other sectors too, just as effectively.’

To find out more about the IMI’s research visit: www.theimi.org.uk/roi