Executive Summary

How to deliver responsive and flexible local employment and skills strategies that support job creation, local economic development and labour market inclusion is a long-standing issue. In support of this, over the last five years various aspects of employment and skills policy have formed a significant element of devolution policies. During this period the government trialled various approaches to decentralisation across the UK but predominantly in English city regions. City Deals and Growth Deals in particular focused to varying degrees on certain aspects of youth employment programmes, adult skills provision and vocational training in order to respond to the needs of specific localities.

The publication of this report coincides with the formation of a new government and a renewed emphasis on devolving responsibilities to local areas in order to promote jobs and growth. There is an opportunity over the course of the next parliament to further unlock the potential of local action on employment and skills to boost growth and improve outcomes for employers and learners through the effective implementation of existing deals and further devolution. This will require more effective collaboration between a range of partners including local authorities, Local Enterprise Partnerships (LEPs) and combined authorities where present, local businesses, business organisations, and education and training providers. By looking back over the last five years we can see how employment and skills policy has featured in the deals to date, reflect on how these have supported local partners to develop more demand-led employment and skills systems and, based on the lessons learnt, present some recommendations on how this might be supported further.

Our analysis focuses mainly on English cities, reflecting where the majority of deals have been made. However, the lessons learned apply to other localities across the UK. The report is based on an analysis of deal documentation as well as in-depth interviews and consultation with over 45 local and national stakeholders, including local authority, LEP and departmental representatives. The data gathered is reviewed against a framework that sets out six key elements of a demand-led local employment and skills system.

Features of an effective demand-led local employment and skills system

An effective demand-led employment and skills system anticipates and responds to the changing needs of the labour market. Over the past decade increasing recognition of the importance of demand-side interventions has been reflected in changes to government policy, including giving employers a greater role in shaping skills policies and introducing measures to stimulate demand. There is also a growing consensus that local partners can play an important role in delivering more demand-led employment and skills systems.

The report identifies six key elements of a demand-led local employment and skills system:

  1. Partnership arrangements to facilitate coordination and cooperation across sectors and localities
  2. Effective employer engagement to ensure there is a direct account of local business needs, as well as encourage their involvement in the design and delivery of initiatives
  3. High quality labour market intelligence (LMI) to inform the design and delivery of employment and skills policy
  4. Shared objectives based on a shared understanding of the local labour market context and priorities for the city region
  5. Alignment between delivery partners which may require service reform and integration at the local level
  6. Performance management and evaluation to effectively hold partners to account and highlight where further changes to the system or individual programmes are required.

These six factors are mutually reinforcing, and taken together provide the key elements of an effective demand-led employment and skills system.

Towards a demand-led system – key findings

In reviewing the feedback from respondents, the following findings and recommendations emerged:

  • To varying degrees, the deals agreed as part of negotiations to localise employment and skills policy have enabled cities and LEPs to flex national policies, fill in gaps to meet local criteria and priorities, and experiment with new approaches.
  • To some extent, the deals have enabled local stakeholders to take steps towards the development of more effective demand-led employment and skills systems, often through closer partnership working. Overall, the evidence suggests that the deals process:
    • Had an overall positive effect on local partnership working, acting as a catalyst for local authorities, LEPs, education providers and employers across sectors and localities to work together in new and/or more effective ways. In particular, cities and local areas stated that relationships with FE colleges had become more collaborative and productive as a result of the deals process.
    • Created an incentive for local employers to engage with the system by giving them a mandate and opportunity to shape local training provision according to local priorities and needs.
    • Created more demand for LMI as local partners have developed evidence-based strategies, although cities and LEPs can be constrained by the availability of high quality LMI and by their capacity to analyse it.
  • There is still scope for improved alignment and integration of services at the local level. Shared outcome agreements or control of devolved funding streams are potential mechanisms to achieve this.
  • To ensure more effective demand-led local employment and skills systems are created, local partners might usefully:
    • Ensure strong governance models are in place that reflect the scale of the functional economy and hold partners to account
    • Continue to explore effective ways to engage with local employers and directly involve them in provision
    • Develop local analytical capacity and capability, making use of LMI to its full extent
    • Implement robust evaluation plans where funding has been secured to deliver pilot programmes.
  • Local partners, including local authorities, LEPs and combined authorities, should continue to build evidence and examples of where and how employment and skills systems designed and delivered by local partners have led to better outcomes for individuals, businesses and local growth.
  • At national level, government could support local partners to develop more effective demand-led employment and skills systems by:
    • Greater coordination of policy and resources at the national level to support innovation and experimentation
    • Ensuring availability of LMI on programme outcomes
    • Setting frameworks for performance management and evaluation
    • Ensuring that local programmes are not duplicated by equivalent centrally-led programmes.

This is the first report produced as part of a strategic partnership between the UK Commission for Employment and Skills (UKCES) and Centre for Cities. The partnership will explore a range of issues with a focus on how to deliver more effective demand-led local employment and skills systems that equip individuals and employers with the skills needed for jobs and growth.