03Key elements of a demand-led local system for employment and skills

There is long-standing and widespread agreement across the public sector and business community that an effective employment and skills system needs to be demand-led. The 2010-2015 government placed continued emphasis on creating a more demand-led employment and skills system, stating in the 2010 Skills for Sustainable Growth strategy the need to ensure that skills provision meets the “real demand demonstrated by employers and individual citizens.” The policy focus since has been on giving more freedoms to the individual learner in selecting training and qualifications, rather than centrally driven targets for adult learning and skills that were in place beforehand.24 Steps have also been taken to test how the system can help raise demand for skills and be more responsive to the needs of employers by encouraging greater employer involvement in the design and delivery of provision, through initiatives such as Employer Ownership Pilots (EOPs), Industrial Partnerships and Apprenticeship Trailblazers.

There is also growing consensus about the important role that local actors can play in establishing a more demand-led system. This is evidenced by the fact that employment and skills were a central feature of the deals agreed between 2010 and 2015. More widely, the OECD has conducted a number of international studies on local skills strategies and states that “the assessment and anticipation of local skills and labour market needs is required to improve the efficiency of the local labour market; better match labour supply and demand to reduce bottlenecks; and better define the content and structure of education and training systems.”25 Recent government reviews have also highlighted the importance of local actors. Two reviews in particular examined how fit for purpose aspects of vocational education were and called for significant reforms of the apprenticeship system and vocational education including the need for greater employer engagement. The Richard Review of Apprenticeships referred to the potential roles local partners could play in facilitating the relationship between employers and apprentices, with local access points to provide employers and individuals with advice and support.26 The Wolf Review of Vocational Education also recommended that employers should be directly involved in quality assurance and assessment activities at local level.27

Six key elements of a demand-led local employment and skills system

Ensuring that employment and skills training provision links to local economic development priorities and the needs of individuals and local employers is challenging as it requires high levels of engagement and cooperation between partners. As discussed previously, these include education and training providers, employment support providers, local authorities, LEPs, employers and the third sector, as well as central government agencies and department. Based on the evidence in the literature and interviews conducted, we have identified six key elements of effective local demand-led employment and skills systems to act as a framework to discuss the evidence provided from interviews with cities and LEPs in Section 3. These dimensions are not mutually exclusive; they support one another and should be seen as a whole.

1. Partnership arrangements

Effective demand-led systems require local coordination and partnership working across sectors and city regions or functional economic areas: “producing better policy alignment between actors responsible for employment, economic development and skills at the local level, as well as working in partnership with private and other non-state stakeholders, will be important for both achieving better job outcomes, and also maintaining or reducing current levels of public expenditure”.28 This requires coordination and partnership working across a wide range of organisations, including universities, FE colleges and training providers, JCP, Work Programme providers and employers across the functional economic area.

Partnerships can take a variety of forms, from formal LEP and combined authority arrangements that are recognised by government with funding made available, to less formal working groups. For example LEPs have been encouraged to engage directly with the FE and HE sectors and training organisations to agree how to generate local demand for agreed strategic priorities.29 In turn this requires sufficient flexibility and space for partners to respond.

2. Effective employer engagement

Crucially, partnerships need to engage with local employers, including SMEs, to set priorities and inform the design and delivery of programmes and to ensure that the content and structure of provision meets local business needs as well as to stimulate increased demand for skills. This is a critical part of supporting business growth and job creation. The failure of some programmes has been associated with their inability to link training services to the needs of local employers.30

Engagement with employers can take many forms, including building stronger relationships with membership bodies, such as local Chambers of Commerce or the Federation of Small Businesses (FSB), or direct engagement with local businesses. Consultation through representative bodies can be an effective way of engaging with SMEs and employers from the broad range of industries present in the local area.

3. High quality labour market intelligence

Policy design and delivery also needs to be informed by high quality labour market intelligence (LMI) to ensure that it reflects the distinct needs of learners and businesses.31 This requires access to up-to-date, robust data on labour supply and demand within the economic area and at national level. It should include comprehensive mapping of existing provision and future demand. Access to data should be coupled with strong analytical capability and the expertise to design appropriate policy solutions based on LMI. Those working with LMI need to be able to pull out the key messages and trends for the local area, ensuring skills policy is focused on significant and growing local industries. Ensuring data is communicated in an accurate and accessible way is also an important part of informing students about local opportunities and those available to them more widely.

4. Shared objectives

Establishing shared objectives based on a common understanding of the labour market context and local priorities, paves the way to a successful partnership and to successful delivery. It also enables more effective targeting of resources as partners are working towards common goals. It may be beneficial to formalise these objectives through a strategic plan or outcome agreement that is periodically revisited.

5. Alignment between delivery agencies

Partners need to align provision at the point of delivery of employment and skills programmes in order to deliver shared objectives, which is likely to require service reform and integration at the local level. This requires delivery partners, such as JCP, as well as colleges and private training providers, to have a level of operational flexibility, as well as strategic flexibility.

This could be supported by outcomes-based agreements, which are used in Scotland, and hold delivery partners to account collectively for the achievement of outcomes, providing an incentive to collaborate on delivery.32

6. Performance management and evaluation

Performance management and evaluation processes should be in place both to effectively hold partners to account and highlight where further changes in the system or individual programmes are required. The performance management framework needs to reflect the outcomes agreed with partners, including employment as well as educational outcomes, and should be monitored on a frequent basis, fostering a culture of evaluation and continuous improvement. Performance management could incorporate payment-by-results models as a mechanism to focus providers’ attention on local labour market demand. Methods for evaluation should also be agreed from the outset, based on what is appropriate given the scale and timing of the initiative.

Figure 2: Six key elements of a demand-led employment and skills system


Centre for Cities, 2015

These six factors are mutually self-reinforcing elements which, taken together, are key elements for making local employment and skills systems more effective and demand-led. For instance, partnership working (1) is the basis for greater employer engagement (2) and developing shared objectives (4). But performance management (6) and the ability to affect change through better alignment (5) should also provide further impetus for partnership working (1). It is not a linear process and ways of working are built up over time with new approaches tested in different local areas. These key elements provide a framework for analysing the feedback from the interviews in next section.


  • 24 Department for Business Innovation and Skills (2010) Skills for Sustainable Growth, BIS
  • 25 OECD LEED (2010) Measuring skills and human capital in local economies, OECD
  • 26 Richard, D. (2012) The Richard Review of Apprenticeships, BIS
  • 27 Wolf, A. (2011) Review of Vocational Education – The Wolf Report, DfE and BIS
  • 28 OECD LEED (2011) Better policies for better lives: Local and regional strategies to relaunch economic and employment development, OECD
  • 29 Local Growth White Paper
  • 30 Hossain, F. and Bloom, D. (2015) Toward a Better Future: Evidence on Improving Employment Outcomes for Disadvantaged Youth in the United States, MDRC
  • 31 OECD LEED (2008) Designing Local Skills Strategies: Emerging Findings from the OECD Study, OECD
  • 32 Reference to UKCES outcomes paper (forthcoming)