Dr Kostas Kollydas summarises the recently released Skills Evidence Review, which offers a timely exploration of how national and local skills policies in the UK are evolving to meet skills and workforce development challenges.
View the Skills Evidence Review.
Context
This review identifies challenges and opportunities in designing local skills policies that align with economic development goals. It examines UK-wide disparities and leverages lessons from local and international case studies, highlighting pathways to address skills mismatches and enhance local capacity for innovation in skills policies.
The report synthesises insights from academic articles, policy literature, expert interviews, and case studies. It aims to provide evidence for local partnerships to create interventions that address skills mismatches, support economic and workforce transitions, and improve skills utilisation.
Key concepts and burning issues
The report describes important concepts such as skills mismatches, which occur when the supply and demand for skills fail to align. Specific types of mismatches (such as undereducation, overeducation, and skills underutilisation) exacerbate workforce inefficiencies. A notable example is the “low-skills equilibrium”, where employers and workers lack incentives to invest in advanced skills, thus perpetuating low-wage jobs and poor productivity.
Workforce skills are important in driving economic resilience and (sub)regional economic growth. The concept of “local skills ecosystems” emphasises the importance of partnerships among local authorities, educational institutions, and industries. These ecosystems should ideally adapt to unique local needs, addressing challenges like low-skills equilibria and skills mismatches. However, especially in the context of the devolution of responsibility for skills, the UK’s skills landscape is complicated to navigate and faces ongoing challenges. For example, economic inactivity, health-related absences, an ageing population, and “Brexit”-driven implications in labour supply have reduced the availability of labour and skills in many areas. Rural areas face additional challenges related to limited infrastructure and access to training.
The review also highlights the growing importance of green skills, digital skills, and innovation skills. Embedding these skills into education systems and ensuring they meet local industrial needs requires coordinated action.
Key findings
The UK’s fragmented devolution framework appears to undermine efforts to build cohesive skills systems. Scotland, Wales, and Northern Ireland manage their own skills systems. England operates a more centralised approach, albeit there is devolution to certain subregions. Areas in England with strong devolution agreements can tailor their skills policies, while others remain tied to top-down approaches, which rather limits their ability to address local needs. For instance, some mayoral combined authorities, like Greater Manchester and West Midlands, have been granted significant powers over adult education budgets. In contrast, other areas operate with limited autonomy, which may ultimately lead to a “postcode lottery” in skills provision. This fragmented devolution creates notable inequalities in local governance capacity.
The review highlights the importance of skills policies that are both integrated and place-based. This means linking skills development with broader local strategies around job quality improvements, housing, transport, and innovation support. Yet, many local authorities lack the capacity to implement such holistic strategies through such coordination. This leaves them unable to fully leverage the potential of skills interventions.
Collaboration is key. Further and higher education institutions are crucial players in local skills ecosystems, as they provide training, knowledge transfer, and hubs for innovation. Again, disparities in institutional capacity, especially between urban and rural areas, hinder equitable access to the provision of high-quality skills and alignment with local needs.
The review delves into several policies across the UK, aiming to offer a more nuanced view of what works and what needs improvement. The Skills Accelerator pilot represents a significant effort to align technical training with labour market requirements. Encompassing Local Skills Improvement Plans (LSIPs) and Strategic Development Funds, the pilot focuses on strengthening partnerships between employers and educators to identify skills gaps in emerging sectors. For example, investments in training programmes for electric vehicles and sustainable heating have created new curricula and upskilled staff in response to local market needs.
The UK Community Renewal Fund was a £220 million initiative that trialled innovative approaches to workforce development. Through localised projects, the fund supported efforts to address post-“Brexit” economic challenges by enhancing skills training and fostering employment opportunities.
Local Labour Market Partnerships in Northern Ireland provide another example of a targeted, place-sensitive approach. These partnerships are tailored to the needs of its 11 Local Government Districts and aim to leverage local insights to design training programmes that align with industry requirements. The WorkWell pilots, implemented in 15 areas in England (including Birmingham and Solihull), aim to integrate health and employment services to help individuals with long-term conditions transition back into the workforce. These programmes illustrate the value of holistic, person-centred approaches that address individual and systemic employment barriers.
The Apprenticeship Levy has struggled to achieve its objectives, as apprenticeship starts for young people and small and medium-sized businesses have declined sharply over recent years. In addition, several employers have used the levy to “rebrand” existing internal staff training programmes rather than creating new opportunities. The new Growth and Skills Levy seeks to address these shortcomings by offering more flexible pathways and focusing on in-demand sectors.
International perspectives
The report also provides illuminating international examples of effective skills initiatives. A particularly transformative case is the Riviera del Brenta region in Italy. This area transitioned from low-skilled footwear production to high-value luxury shoe manufacturing. This transformation was driven by collaboration among local businesses, unions, and a local polytechnic specialising in workforce training. These efforts, combined with diversified market strategies and workforce upskilling, boosted productivity, wages, and health and safety standards. This case in Italy exemplifies how skills development when paired with effective skills utilisation and collaboration, can shift an area from low-value production to a knowledge-driven economy.
Other examples include Australia’s focus on high-skills ecosystems, where sectors like yacht building and civil engineering benefited from integrated skills approaches. However, challenges related to stakeholder resistance to new approaches and changes in government at the state and federal levels hindered progress. Cities like Cleveland (USA) and Leipzig (Germany) also highlight the importance of aligning skills development with local economic strategies, such as manufacturing and automotive clusters.
Finally, insights from Australia show the potential of improving skills utilisation within organisations through strategies like job redesign to better leverage employee capabilities, job rotation to expand skillsets, and autonomy to encourage innovation and mentoring. Such practices not only enhance productivity but also improve employee satisfaction and adaptability.
Conclusion
The Skills Evidence Review calls for a more integrated, collaborative approach to skills development and associated place-based policies. The UK’s skills system remains complex, shaped by multiple funding sources and governance models. Despite devolution advances, substantial disparities persist in local capacities to implement cohesive skills policies.
Green skills and innovation skills present significant opportunities. In this context, flexibility in training programmes and support for transitioning industries are important. Future research could explore effective governance structures promoting innovation, tailored rural and urban strategies, and the collaborative roles of further and higher education institutions. These avenues will be key to building resilient, inclusive skills ecosystems and driving sustainable growth.
View the Skills Evidence Review.
This blog was written by Kostas Kollydas, Research Fellow, City-REDI, University of Birmingham.
Disclaimer:
The views expressed in this analysis post are those of the author and not necessarily those of City-REDI or the University of Birmingham.