‘If Labour is serious about upskilling Britain, it must mobilise local businesses’

Never has there been a more difficult time for a young person – no matter how enthusiastic or talented – to finish school and step out blinking into the light of the labour market.

More than seven in ten teens and young adults in the UK say they wish they were not starting their careers in the current economic climate. Understandable, given that around one in four NEET young people have been job hunting for over a year. Labour are so worried about this they’ve asked Alan Milburn to lead a national review into young people out of work.

But young people’s lives start in their communities, their neighbourhoods, the place where they live. Achieving real change for them, and ensuring it spreads across the country, will require local responses.

At Demos, we are making the case for developing new ‘economies of coordination’ – working at the hyperlocal level to align start-ups, scale-ups and small businesses, with local authorities, educational establishments and anchor institutions to ensure that local economies are front and centre of the national economic recovery plan.

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Focusing on the local level is crucial, since barriers to the labour market are not experienced evenly by young people across the country. Those in Britain’s more disadvantaged areas are at continued risk of falling further behind their peers in wealthier and more well-connected regions when it comes to access to high-skilled training and employment. These regional inequalities will have to be addressed if Labour’s opportunity mission is to stand any chance of succeeding.

But this tale of woe is not just about the young people struggling to enter the labour market. The economic opportunities in local towns and neighbourhoods are also critical for Labour’s growth mission, since, when people’s talent, effort and enterprise are boxed in by the places they live, local productivity suffers and national growth is stifled.

It is fair to say the government is aware of this and on the case. It has introduced a range of measures aimed to bridge the skills gaps across the country and support young people into work. For example, the introduction of Skills England and the Modern Industrial Strategy will strengthen the skills pipeline in frontier sectors and at a local level, the Growth and Skills Levy will allow for more flexible skills training. Indeed, Andrew Pakes MP recently discussed on LabourList how this government has acted to ‘bring skills in from the cold’.

But the government cannot do this alone; actioning well-intentioned skills policy necessitates engagement from businesses on the ground.

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While large companies have the capacity to do this, Britain’s 5.6 million start-ups, scale-ups and smaller businesses often struggle to engage with these types of policies, with only 5 per cent of SME employers using Government or local authority grants or schemes. Arguably, these are the businesses that matter most when it comes to regenerating local areas. Small and medium-sized enterprises employ around 60 per cent of the UK workforce and sit at the heart of local economies. They provide a strong sense of community identity, and have a direct stake in investing back into their communities and creating opportunities for the next generation.

If Labour’s skills policy is to have genuine impact on the most deprived neighbourhoods, it needs to focus on supporting start-ups, scale-ups and small businesses to have their needs heard and met. This is where our proposed new framework, ‘economies of coordination’ comes in.

In the same way that economies of scale describe the cost advantages that businesses benefit from as they grow, economies of coordination describe the cost advantages that businesses benefit from when their knowledge and activities are aligned with one another and other local bodies. This is brought to life through strong local networks, sector bodies or economic partnerships guided by a collective vision of a stronger local economy and better opportunities for young people.

Over recent weeks we have been meeting the organisations at the cutting-edge of this work to strengthen local skills pathways. One example is an apprenticeship training provider creating a pipeline of apprentices for dozens of local industrial businesses – critically, led by the needs of those businesses and even training apprentices on the specific industrial equipment those businesses use. Another is a council team who have developed local sector boards, regularly convening local businesses and skills providers to share tailored knowledge and develop partnerships – an initiative which has enabled teachers to take students into workplaces and businesses to deliver practical lessons in schools, beefing up the skills pathway for local students. These are just two of many pockets of practical innovation happening independently at a local level.

Economies of coordination would make it far easier to kick start and scale this kind of activity across the country. It’s all about bringing down barriers for start-ups, scale-ups and small businesses seeking to engage with larger actors such as education and training providers and enabling them to better pool their capacity and collective voice.

Whilst the government and Skills England are working to understand skill gaps across the economy, and match them with skills providers, they will find it extremely challenging to reflect the complex skills landscape across all sectors and places, particularly as AI rapidly transforms that landscape. It is only by linking up networks of local businesses, and enabling them to express their collective needs directly and regularly to local skills providers, that we can respond to local skills gaps flexibly enough.

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For all of these reasons, the effective development of economies of coordination would go a long way towards determining the extent to which regions that have felt decades of neglect can be rebuilt and re-energised. Without them, well-designed national skills policies will continue to falter. With them, start-ups, scale ups and small businesses can become engines of renewal for their communities.

This is how young people everywhere are given access to the opportunities they deserve, how left-behind places are turned into the drivers of economic growth, and ultimately how Labour’s growth and opportunity missions will find success.

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