Skilling up the regions: Unlocking the UK’s productivity potential

by: Michael Kane, Senior Director at PwC | on: 28.03.17 | in: Devolution, Productivity, Skills and the labour market

In his Spring 2017 Budget, the Chancellor rightly recognised that if the UK is to improve productivity and achieve growth, focusing on delivering the right skills for the economy, the improvement of people and the growth of businesses will be essential. However, to truly unlock the UK’s productivity potential, a local approach to skills is needed which fully recognises the needs of local businesses and serves regional economies.

Skilling up the regions: Unlocking the UK’s productivity potential

by: Michael Kane, Senior Director at PwC | on: 28.03.17 | in: Devolution, Productivity, Skills and the labour market
In his Spring 2017 Budget, the Chancellor rightly recognised that if the UK is to improve productivity and achieve growth, focusing on delivering the right skills for the economy, the improvement of people and the growth of businesses will be essential. However, to truly unlock the UK’s productivity potential, a local approach to skills is needed which fully recognises the needs of local businesses and serves regional economies.

The current skills system is not delivering the skills that UK businesses or the economy needs. Skills shortages consistently top the list of concerns of business leaders in our annual Global CEO survey, while the lack of powers over skills is a concern for local leaders.

This means a new model of skills provision is needed, which changes the way the skills sector is funded and how people and business engage with it. The new model, set out in our Skilling up the Regions Talking Points, should be demand driven and employer-led at a local level, with clear funding flows and an effective process for matching individuals to job opportunities.

Devolution offers the opportunity to develop solutions that work locally and regionally and deliver the right skills in the right places. A locally-driven model would mean skills planning is done on a place basis, with employers in the driving seat, shaping skills planning in line with local needs. In such a model, Local Enterprise Partnerships (LEPs), representing business, would work collaboratively with local government and skills providers to translate local demand into effective skills provision, using new platforms such as the Sheffield City Region Skills Bank.

For a place-based system to work, a devolved approach to funding is needed. Devolved funding will give local leaders and employers the ability to tailor their approach to skills to their own unique labour market strengths, weaknesses and potential, meaning money follows demand and is targeted on local needs. Moving to such a system will need funding certainty in order for providers to respond and transition. Funding will also be needed in the short term to cover the need for remedial training for Level 2 skills.

A further challenge of the current skills system is that individuals have the opportunity to take the training they want, but don’t have efficient or effective careers information to make that choice informed or meaningful. More effective careers guidance will both help individuals find work and develop in their careers, as well as helping match supply and demand at a local level and delivering a potential boost to productivity.

With local institutions such as city regions, LEPs and Combined Authorities strengthening, there is a window of opportunity to create a new locally-driven skills model that can deliver on this vision. This new devolved approach requires a radical reorganisation of the current system. Central government, local government and business, as well as skills providers, will all have their role to play in building this new inclusive skills system which helps people reach their full potential, businesses grow and regions prosper.

Michael Kane is a PwC Director focusing on resolving issues in the public sector, education, training, and international development and currently leads PwC’s work on Employer Ownership of Skills.

Skilling up the regions: Driving productive and inclusive growth across the UK can be downloaded here.

This article was originally published on PwC’s Public sector matters blog and is republished here with permission.

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