ESF - A Comprehensive Review
The UK’s training industry, or at least those parts of it which rely on ESF funding, is in a time of flux. Following the signing of the EU Withdrawal Agreement, we now know that the current batch of ESF contracts will be the final set of awards. So, how has ESF shaped the industry in the past 6 years, and what does the future hold for the UK’s ITPs?
ESF Growth
While the EU-wide ESF budget increased to €120.4 billion for 2014-2020 compared to €115.6 billion for 2007-2013, the UK saw a modest reduction in total allocation, while the UK Government’s direct contribution to the UK allocation reduced by 6% from €4.1 billion to €3.9 billion. Other states including Germany and Austria saw large real-terms reductions in allocations, while the big winners were states such as Bulgaria, Poland, and Italy.
The shorter operational period for the second round of ESFA ESF contracts in the UK is reflected in a smaller overall UK spend for the period 2019-2021 of £313 million vs. £462 million for 2014-2019.
Who are the largest contractors in each area? What are they delivering? What are the contract values?
The latest round of ESFA ESF funding saw a further consolidation of the majority of funding into the hands of a few big winners, including now-familiar global giants like Serco and PeoplePlus.
Serco secured the lion’s share of Employee Support in Skills funding, with 17 contracts worth £60.5m throughout central and south England. Meanwhile, The Growth Company secured 8 contracts worth £56.5 million for Employee and Unemployed skills support, as well as a large NEET contract in Greater Manchester.
The bulk of Skills Support to the Unemployed contracts were snatched up by PeoplePlus, with a total of 11 contracts worth £38.8m including Tees Valley, North Eastern, Lancashire, Greater Birmingham and Solihull, and Cheshire and Warrington.
Dimension Training Solutions Limited secured 7 contracts worth £20.7m - particularly in the Midlands and West England - specialising in NEETs (£6.5m) and Employee Support in Skills (over £10m).
The big four winners were awarded more between them (176.5m) than the remaining 47 primes (137.2m), highlighting the ongoing necessity for small and medium ITPs to focus on building partnerships and developing capacity for local delivery in their areas of specialism.
| Company | Value of Contracts (£ million) | Contracts Won |
| Serco Limited | 60.5 | 17 |
| The Growth Company Limited | 56.5 | 8 |
| PeoplePlus Group Limited | 38.8 | 11 |
| Dimension Training Solutions Limited | 20.7 | 7 |
| Total | 176.5 | 43 |
| All other providers | 137.2 | 89 |
Fig. 1 Largest ESF Contractors 2019-2021 ESF Performance and Impact
The real-terms impact of ESF on the labour market is challenging to quantify. In 2017-2018, Ecorys undertook a study to determine the plausibility of measuring the impact of ESF in England. Following their findings that it was plausible but presented “challenges, risks and potential limitations,” nothing has been heard about an expected delivery date for any evaluation.
However, indications from ESF NEET and ongoing skills deficits may indicate that ESF has failed to meet all of its objectives...
ESF NEET: Success or Flop?
While NEET levels in the UK have been falling on the whole since 2009, between 2016 and 2019 i.e. the period covered by the ESF NEET contracts, very little change has been seen nationwide.
On the regional level, success has been mixed: some areas which have seen significant investment in ESF NEET, such as the North West (+2.1% NEET 16-24 2016-2019), London (+1.5% increase 2016-2019), have experienced small increases in NEET while others such as North East (-1.4%) and Yorkshire (-0.6) have seen modest decreases.
Questionable performance may be reflected in the new NEET contract awards; the roster of providers selected for the latest round underwent a major overhaul. NEET contracts, which had previously been in the hands of a few big players including Seetec and Prospects Services, have been largely handed to local providers including colleges and councils, along with a handful of established names including Dimensions Training Solutions, Skills Training UK, and CSW.
Underinvestment Creating Skills Deficits
Ongoing challenges presented by the struggling NEET sector may be compounded by chronic underinvestment in adult skills compared to other G7 countries. Furthermore, huge sums continue to be poured into higher level apprenticeships, aggravating a long-standing lack of availability of lower level qualifications. The outright absence of lower level qualifications in some areas has contributed to an ongoing problem of social mobility in the UK in which just 1 in 6 low-paid workers move on permanently to higher paid work.
The lack of low-level qualifications will only become more urgent as the Brexit transition period draws to a close at the end of 2020. Swaithes of low-paid positions across the economy are reliant on low-skilled labour from the EU, and they will need to be replaced domestically.
The Government’s pilot National Retraining Scheme has been widely viewed as a potential fix. However, the scheme is still in its infancy, may not be expanded nationwide, and has been hailed as the solution to a myriad of problems in the skills and labour market. It might be wise to revise expectations until the shape of things to come becomes clear.
Absent clear direction, and with the majority of UK skills and training spend redirected to loans and apprenticeships - which are expected to comprise half the adult further education and skills budget in the current period - the situation is only going to worsen for learners and providers both as we wave goodbye to ESF.
ESF & Brexit: What does the future hold?
This is, of course, the question on everyone’s lips. The Withdrawal Agreement is done and dusted, most of the final contracts have been awarded, and ESF - in the UK, at least - is soon to be no more. But where does that leave UK ITPs? ESF has been a huge source of funding in the sector for many years and forms a significant percentage of many providers’ turnover.
The good news is that the EU Withdrawal Agreement provides for ongoing UK participation in previously agreed EU programmes. So, the current batch of contracts due to run through July 2021 are safe and will run their course with no expected disruption. However, what happens next remains to be seen.
The Government has pledged to create a new “Shared Prosperity Fund” to replace the £2.1billion per year of EU Structural Investment Funds which the UK will no longer receive. A pilot “national training scheme” has also been launched in a handful of areas of England. However, to date no detailed plans have been released and, while stakeholders have pushed to maintain prior levels of funding, no firm commitments to match funding have yet been made.
The sad fact is that, for the time being, nobody outside of Westminster has any idea what the future holds until the Government makes its intent clear. In the meantime, ITPs who have been reliant on ESF - and especially small and medium local providers - would do well to put other plans in place.
