Delivering change in disadvantaged places must start with skills policy

Five things to watch in 2020 that could help break the low-skilled equilibrium in disadvantaged places

We enter the 2020s as a country divided by geography and economics.

The economic growth of the past decade has not been reflected in prosperity everywhere in the UK and too many places are currently trapped in a low-skilled equilibrium.

Their residents are more likely to have low or no qualifications, and their businesses tend to offer lower-skilled, manual and routine jobs on low-wages and at high-risk of automation.

This, in turn, provides little incentive for residents to train and upskill, with implications for productivity.

Supporting these places to make the transition out of their low-skilled equilibrium into a virtuous cycle of economic growth must be a key policy goal for this new decade.

This will require action on multiple fronts, with skills interventions undoubtedly playing a central role.

To mark the New Year, I’ve compiled a list of five things to watch in the skills space in 2020 for the impact they could have on disadvantaged places:

1. The launch of the UK Shared Prosperity Fund

As the UK leaves the European Union at the end of the month, it will cease to benefit from the EU Structural Fund, dedicated to supporting regions that are lagging behind economically. The Government has promised to replace this with a UK Shared Prosperity Fund and to devote £500 million from this new fund to support disadvantaged people get the skills they need to succeed in the labour market.

This is welcome. As the new fund gets developed, there is an opportunity to allocate resources differently, tailoring them to the places with the most acute skills needs and designing training around the skills most in demand in the labour market.

In the coming weeks Centre for Cities will publish more details on how the new scheme could work in practice.

2. A National Skills Fund for Small and Medium-Sized Businesses (SMEs)

Alongside the UK Shared Prosperity Fund, the Conservatives pledged to introduce a National Skills Fund – aimed at improving take-up of high-quality training and education among individuals working in SMEs.

In an ever-changing labour market, initiatives such as this and the UKSPF are more important than ever, as they can support people that have already left compulsory education to upskill and stay relevant in the labour market.

As we progress into the decade, the Government’s goal should be to make such initiatives the norm, ensuring that every adult, especially those with low-qualifications has access to education and training.

3. The next phase of the Apprenticeships Levy

Then there are questions and opportunities around apprenticeships. The first phase of the apprenticeships levy is coming to an end this year, with Centre for Cities’ analysis showing that, so far, the new system has had some unexpected consequences, with a starker decline in the number of apprenticeships in disadvantaged places.

While part of this change may be explained by a shift away from lower-quality standards through the roll-out of new apprenticeships frameworks, the geographical consequences of such move are currently being felt the most by precisely those places that are more in need of skills interventions.

As such, as the Government reviews the new system, it must consider the geographical impact of the levy and ensure that it works for every place. During National Apprenticeship Week Centre for Cities will provide more details on how the Government could achieve that.

4. The start of the revolution of technical education

Technical education is an area where the Government has more than one ball rolling. In addition to its focus on apprenticeships, T levels are being rolled out, 12 new Institutes of Technology have been announced and eight more have been promised. At the same time, the Government has pledged to invest £2 billion to upgrade the entire college infrastructure. Progress in this policy area is much welcome, especially for disadvantaged places, where less people are likely to go to university.

However, to ensure the maximum impact of such initiatives, these measures must then be implemented alongside interventions aimed at attracting more high-skilled, highly-productive businesses to disadvantaged places, providing individuals with access to good quality work-experience in jobs that are likely to continue to be in demand in the future.

5. Promised investments on arts and extra-curricular activities

Thinking ahead to the end of the decade, promised investments on arts and extra-curricular activities have also the potential to help break the low-skilled equilibrium, by supporting young people to develop the right skills for the labour market of the future.

As Centre for Cities highlighted in previous research, extra-curricular activities, such as sports, drama clubs and other voluntary activities can help children develop interpersonal and analytical skills such as negotiation, team-working and critical thinking – skills that are set to become ever more important in the labour market.

Elena Magrini, Senior Analyst, Centre for Cities