As British pupils receive their General Certificate of Secondary Education (GCSE) results, their next steps are shaped by choices that politicians have made about the further education system. Drawing on the Economy 2030 Inquiry, Aadya Bahl reviews research on what needs to be changed in further education to reduce inequalities and boost the economy.

The choices that British 16-year-olds are making in the next few weeks about their future studies matter not just for them and their families but also for the nation’s economy.

Britain needs a workforce with graduate-level skills to achieve its potential as a high-value, service-based economy, as highlighted by the Economy 2030 Inquiry. This need is acute in the country’s strategic growth sectors, namely financial and business services, the creative and cultural sectors, and the life sciences. These typically demand workers with higher levels of formal education and offer substantial wage premiums to university graduates.

The message seems clear: education is key to thriving in Britain’s future economy. The British education system has nine qualification levels, from entry level (Levels 1 to 3) to Level 8 (doctorate or equivalent). The higher the level, the more difficult the qualification. Level 3 qualifications consist of A-levels and their equivalents in technical or vocation education and are mainly taken by young people after their General Certificate of Secondary Education, or GCSEs, (Level 2).

The Economy 2030 Inquiry analysis reveals a stark reality: 30 per cent of young people are not undertaking education or training by age 18. Among those who do continue their education, the majority opt for higher education. But what of those 16-year-olds who do not see themselves following the well-worn A-levels-to-university track? How can pupils who are not drawn to the traditional route develop the skills necessary to contribute to, and benefit from, economic growth?

For these pupils. there are alternatives to the academic path: technical or vocational routes, including T-levels (alternative to A-levels and apprenticeships), applied general qualifications such as the ones provided by the Business and Technology Education Council (BTEC) and apprenticeships. These pathways provide practical, industry-focused learning and can serve as stepping stones to higher education. But there are hurdles along the way.

Navigating apprenticeships

Apprenticeships, for example, exist across sectors and are subject to employer-led standards. They have huge potential for offering a good start in life for people not going to university, but in England, approximately half of all apprenticeships have been taken up by people aged 25 and over. They are more likely to undertake expensive courses, which tend to be financed by the Apprenticeship Levy (equal to 0.5 per cent of the pay bill for companies with a pay bill of £3 million a year). Employers can claim back the apprenticeship levy they have paid based on their investment in off-the-job training for apprenticeships.

This may suit individual employers training existing staff, but in the long run, it is in the collective interest to train as many young people as possible to level 3, the “most difficult” of the three entry qualification levels. An “apprenticeship guarantee” ring-fencing a substantial part of the levy for under 25s would help facilitate the school-to-work transition through introducing demand-led funding, as exists in schools and higher education.

BTECs and the educational landscape

The new Education Secretary, Bridget Phillipson, has paused and will review plans to scrap some applied general qualifications, including BTECs, that overlapped with existing T-levels.

BTECs have long been a popular choice for many young people going to further education colleges. A report by the Education Policy Institute (EPI) and the Oxford University Centre for Skills, Knowledge and Organisational Performance (SKOPE) revealed that in 2022, 13 per cent of 16–17-year-olds in further education colleges took A-levels, but around 43 per cent were undertaking other Level 3 qualifications such as BTECs in England.

BTECs not only provide practical learning for those interested in a particular industry but are also an alternative route from A-levels into university. In fact, one in four young people in England use BTECs as a pathway to higher education. It is estimated that the original proposals to remove funding from some Level 3 qualifications would impact close to 40,000 young people aged between 16 and 19, affecting six per cent of non-A-level enrolments at this level.

Individuals pursuing BTECs are more likely to be from disadvantaged backgrounds when compared to their A-level counterparts. These young people are more likely to come from neighbourhoods with low rates of university participation, or to belong to ethnic minorities.

Level 3 qualifications also come with a substantive wage premium. Individuals having a BTEC at Level 3 can, on average, earn 32 per cent more than individuals with a Level 2 vocational qualification, allowing disadvantaged students a chance to climb up the ladder. But the Economy 2030 Inquiry highlights that there has been a 12 per cent cut to further education funding per pupil since 2012.

Sub-degree qualifications

To build a highly skilled workforce, clearly defined pathways are needed for those who have completed Level 3 qualifications. The well-worn undergraduate route is one such pathway, but sub-degree qualifications, such as the Higher National Certificate (HNCs) and the Higher National Diploma (HNDs), are less common.

According to the Economy 2030 Inquiry’s Learning to Grow report, only nine per cent of people aged 25-64 hold a sub-degree qualification in the UK, with this proportion being much lower for younger cohorts: only four per cent of 25-year-olds in the country hold a Level 4 or Level 5 qualification.

The inquiry suggests that the share of workers qualified to a sub-degree level in the UK should be three times higher to meet the demands of the growing economy.

But a lack of availability and awareness of clear and high-quality routes into Level 4 or Level 5 qualifications presents a significant barrier. For those achieving good Level 3 qualifications, there is often no clear pathway to further their education at a sub-degree level.

This shortage has grave implications for the growth sectors that rely on an increasing number of higher-level skills to expand. Estimates suggest that these sectors are missing roughly 660,000 workers that are educated at a sub-degree level due to this gap. Despite the high demand, many students are either unaware of these pathways, or do not understand how they link with earlier qualifications and future career and education prospects.

The way forward

While the push towards higher-level skills aligns with the needs of our evolving economy, the value of alternative pathways cannot be overstated, especially in their role of promoting social mobility and addressing skills gaps. It is crucial to maintain a diverse range of pathways. The establishment of Skills England, which aims to transform the current skills landscape focusing on the post-16 education pathways, provides an opportunity to build a strategy that supports skill development and removes barriers to opportunities.

These post-16 pathways need consistent and adequate funding to maintain quality and ensure accessibility. In addition to funding, there is also a pressing need to improve signposting and career advice. Students must be made aware of all options and opportunities, not just the traditional academic routes. Widening access to alternative pathways and ensuring young people have the right information is vital for making informed decisions that maximise their potential.

University education remains crucial in developing higher-level skills. But technical and vocational routes, including Level 3 and sub-degree qualifications, play an equally important role in building a skilled and inclusive workforce. Investing in skills and education at all levels is not just an important lever for economic growth; it is also an investment in the future of every young person in the country.

• This blog post draws from the Economy 2030 Inquiry, a joint initiative between LSE’s Centre for Economic Performance and the Resolution Foundation, funded by the Nuffield Foundation.
• The post represents the views of the author(s), not the position of LSE Business Review or the London School of Economics and Political Science.
• Featured image provided by Shutterstock
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