Apprenticeship levy may cause job losses, CBI boss Carolyn Fairbairn warns

A planned levy on companies to pay for more apprenticeships may lead to "significant" job losses, the new head of business lobby group CBI has warned.

The government hopes to raise £3bn to fund three million apprenticeships from the 0.5% levy on company payrolls.

CBI boss Carolyn Fairbairn said firms might sack workers to save on costs.

But a government spokesperson told the BBC the new levy would help the economy and "turbo charge" productivity.

The new apprenticeship levy will be imposed from April 2017 on businesses with a wage bill of more than £3m.

'Gulf in understanding'

Unless there are changes, it is "inevitable there will be significant job losses" in some sectors, Mrs Fairbairn told The Sunday Times.

She said: "There is a gulf in the government's understanding of what it is doing here and the impact on sectors like retail and its most vulnerable employees."

Low-paid workers will be the worst affected as companies look to make savings, she said.

Business groups have described the levy as a new "payroll tax", although the government estimates 98% of employers would be exempted.

"The new levy will mean that businesses and the public sector invest in the skills and training they need," a government spokesperson said.

Corporation tax will also be cut over the next five years from 20% to 18%, saving firms £6.6bn by 2021, the spokesperson added.

George Osborne uses a wrench at an engineering company with the help of apprentice James Spence in April

National Living Wage

Companies already face extra costs from the new National Living Wage and automatic pensions enrolment, Mrs Fairbairn said.

From April, workers aged over 25 will receive a minimum of £7.20 an hour under the compulsory living wage.

Government advisors have estimated the cost to UK businesses will be more than £1bn from the wage change.

Since taking over in November, Mrs Fairbairn, who has previously worked at the BBC, ITV and consultants McKinsey, has also criticised the government for delaying a decision on airport expansion for London.

In other interviews she has spoken out against networking business dinners, saying they are "not very inclusive" for women.