Advance devolution with clearly defined powers for local skills policy innovation, research says

Skills mismatches are a challenge that successive governments have been grappling with for years. As industries across the UK continue to respond to technological advancements and changing global demands, the skills needed for the future (including digital, innovation, and green skills) must develop to meet new economic, technological, and environmental challenges.

New research from City-REDI at the University of Birmingham and the Local Policy Innovation Partnership Hub argues that increasing devolution for skills policy will help local governments address local skills needs more effectively. The Skills Evidence Review summarises skills policy across the UK, focusing on challenges and opportunities in designing innovative local skills policies, the role of local skills ecosystems, and that of higher and further education institutions in supporting skills development. It draws on local and international case studies from the academic and policy literature to highlight key learnings from place-based interventions related to skills. The research was funded by ESRC, AHRC, and Innovate UK.

Dr Konstantinos Kollydas, Research Fellow at City-REDI and the author of the report, said: “The UK faces a productivity challenge partly due to the centralised nature of related policies, such as education and skills, innovation, transport, and planning, alongside fragmented local

institutions in terms of both function and location. Scotland, Wales, and Northern Ireland each manage their own skills systems. England adopts a more centralised approach, although certain subregions have been granted devolved powers. Still, cities like Birmingham, Manchester, and Glasgow lag behind not only London but also similar European cities in terms of productivity. This is partly because of weak devolution, fragmented policy-making, and inconsistent funding, which makes it hard for local governments to implement national policies or develop tailored investment strategies.”

The report identifies key challenges relating to how skills policy is currently managed:

• Geographical disparities in local powers and governance for skills-related policies limit the ability and capacity of many UK places to enact innovative local skills policies.
• Many areas lack the capacity to integrate skills interventions within broader economic development strategies.
• Variations in the capacity of higher and further education institutions across places impact skills alignment with local requirements, while the limited direct levers of regional authorities over higher education complicate cohesive local partnerships
• Diverse skills needs across places highlight urban-rural disparities, driven by differences in infrastructure, economic opportunities, and local training access.
• Underutilisation of skills in local economies often stems from a disconnect between job requirements at the point of hiring and actual skills usage in practice.

The report recommends a number of actions to address these challenges, starting with introducing more comprehensive devolution agreements that include clearly defined powers for skills policy development and implementation at the local level.

Dr Kollydas explained: “For instance, the Government could allocate direct funding control to more local authorities for adult education, training, and employment programmes. It could also create subregional hubs that provide technical assistance to support weaker areas in building governance capacity, and ensure these changes are implemented carefully to avoid adding further instability to the existing complex skills policy landscape.”

Other recommendations include:

• Supporting local authorities in creating integrated development plans that align skills, housing, transport, and other related domains.
• Providing more capacity-building and encouraging cross sector collaboration to improve productivity and economic growth.
• Strengthening collaborative partnerships between FE and HE institutions, local authorities, and industries to ensure training programmes are directly aligned with local economic priorities.
• Encouraging universities and colleges to lead regional skills development initiatives.
• Developing targeted, place-specific interventions to address skill gaps by improving rural training infrastructure.
• Promoting innovation by integrating digital and green skills tailored to local industries (e.g., renewable energy and smart agriculture).
• Encouraging local businesses to adopt organisational changes that promote effective skills utilisation to align employee capabilities with business needs.
• Supporting local employment and training initiatives that focus on practical skills application within organisations to ensure improved productivity outcomes.

Dr Kollydas concluded: “Cohesive and forward-looking place-based skills policies are important for addressing the UK’s productivity and skills mismatch challenges. Strengthening collaboration among local governments, education institutions, and businesses will enable tailored approaches to subregional skills development, particularly in green and innovation-related areas. Hence, empowering local areas with greater autonomy and resources can drive more inclusive economic growth.”