Understanding the New Industrial Training Levy for the Construction Industry

The UK government is making strides to strengthen the training framework within the construction industry through a new piece of legislation: The Industrial Training Levy (Construction Industry Training Board) Order 2025. This order, crucial for ensuring a well-trained workforce in the construction sector, establishes how funds will be gathered and used to address skills shortages that have long plagued the industry.

Key Highlights of the Levy Order:

1. Purpose and Implementation:

   • The legislation empowers the Construction Industry Training Board (CITB) to collect fees from employers within the construction industry. The funds raised are dedicated to supporting training initiatives, ensuring workers have the skills necessary for the industry's needs.

2. Geographical Scope:

   • The Levy Order applies to England, Wales, and Scotland, meaning employers in these regions will be subject to the levy.

3. Why This Matters:

   • Training boards like CITB are a legacy from the 1960s, designed to tackle skills shortages that arise due to market failures. Despite the industry's acknowledgment of the need for training, many employers do not invest enough in skill development. The levy aims to correct this by pooling resources for collective workforce development.

4. Levy Details:

   • Employers in the construction industry will face a levy rate of 0.35% for direct employment and 1.25% for indirect employment. These rates are consistent with those set in 2022, after a temporary reduction in 2021 due to the pandemic.
   • Small employers benefit from increased exemption thresholds. Companies with wage bills under £134,999 are exempt, while those between £135,000 and £449,999 receive a 50% reduction.

5. Industry Support:

   • Although there wasn't a formal 'consensus' process for this one-year order due to an ongoing review of Industry Training Boards, informal consultations indicate industry support for the levy.

6. Financial Implications:

   • The levy is expected to raise £223.7 million for the 2025-2026 period, slightly up from £202 million in the previous year. These funds support various training programs, apprenticeships, and grants, ensuring the industry benefits directly from the levy.

7. Impact on Businesses:

   • While charities are exempt, the legislation affects small businesses, which make up a significant portion of the industry. However, these small firms can still access grants without contributing to the levy, providing a safety net for skill development.

8. Future Outlook:

   • This one-year order provides a stopgap measure while a broader review of Industry Training Boards takes place. Future levies will require further industry consultation and government approval.

In summary, the 2025 Levy Order is a continuation of efforts to bolster construction industry skills through shared financial responsibility. By ensuring that both large and small employers contribute to and benefit from a skilled workforce, the order aims to address persistent training gaps, ultimately enhancing the industry's capacity to meet its skill demands.