Skills shortages could last longer as European funding ends, councils warn

Skills shortages could last longer just as demand increases and dedicated European funding ends, the Local Government Association warns today.

In a snap survey of its members, the LGA reveals demand is increasing for skills in new industries such as in renewables, green technology, digital and cyber, while firms are struggling to fill essential roles in more established workplaces such as hospitality, care work and logistics.

Some people with higher qualifications are increasingly taking on work which they are overqualified for, leaving those with fewer qualifications even further from the labour market, despite employers wanting to retrain their staff and recruit more widely.

Economic inactivity and those not in employment, education or training is also on the rise in many areas, according to the survey. Some of the causes of this have been attributed to physical and mental health issues in the wake of the pandemic, a lack of career options and apprenticeships, as well as migrants, care leavers and the digitally excluded being disproportionately affected.

The LGA, which represents councils in England and Wales, is also highlighting concerns about a seven month gap on average between the imminent ending of the European Social Fund (ESF), a key source of investment into skills training and jobs creation which has to be spent by the end of this year, and its domestic replacement the UK Shared Prosperity Fund (UKSPF) the employment and skills element of which for most areas is due to start in 2024.

Nearly half of councils responding to the survey said their biggest concern was being less able to help those who had previously received support from ESF, meaning fewer people being helped into work or training. The LGA said this is due to delays in receiving vital replacement funds and their shorter timescales, preventing them from planning longer-term programmes.

Despite councils and combined authorities being uniquely placed to understand the skills challenges in their own local areas, the LGA says the fragmented and disjointed nature of current national employment and training schemes makes it difficult to target and join up provision for learners, unemployed people, career changers and businesses. 

Previous LGA analysis has found that about £20 billion is spent by central government on at least 49 national employment and skills related schemes or services in England, managed by nine Whitehall departments and agencies, with no overall national strategy or accountability.

The LGA says vital national support such as ‘skills bootcamps’ and other such programmes are subject to unnecessary bidding, using up valuable time and money which could be better spent on planning longer-term strategies to help people retrain or find work, making the most of local investment.

The LGA also warns that Whitehall’s delays in distributing this year’s UKSPF funds for other priorities should not be repeated next year and there should be no more short-notice changes, which could impact on the delivery of training and job support.

Instead, councils, combined authorities and their local partners -businesses, colleges and training providers - need certainty over future allocations so they can address the different labour market and skills challenges they all face.

Mayor Marvin Rees, Chair of the LGA’s City Regions Board, said:

“Everyone deserves the opportunity to thrive and fulfil their potential by upskilling or retraining, and employers are crying out for new recruits with the right skillsets. Local councils are best placed to connect them, working alongside the business community, unions and our vital training organisations.

“To do this, we need long-term funding for employment and skills development in our local areas, with the UKSPF included.

“Our snapshot survey reveals councils’ deep concerns about being able to meet demand and plug urgent skills gaps, whether it be for growing green jobs to meet net zero targets, or for filling essential vacancies in our health and care workforce.

“The Government needs to match this urgency by giving councils and combined authorities the vital, long-term and consistent funding they need on time, to encourage people back into the workforce, match jobseekers with employers and safeguard the future of our local economies.”

Notes to Editors

LGA: Employment and skills provision survey 2022/23

The LGA’s own Work Local scheme is a ready-made blueprint which would give democratically elected local leaders the power and funding to work with partners to join up careers advice and guidance, employment, skills, apprenticeships, business support services and outreach in the community.

Work Local: The LGA’s ambitious, practical vision for devolved and integrated employment and skills provision.

The £2.6 billion UK Shared Prosperity Fund is a central part of the Government’s levelling up agenda, intended for councils and combined authorities to help create jobs, support small and medium enterprises, invest in communities and improve pride in place across the country.

The Government made late changes to restrictions on the use of UKSPF in March 2023 to try and address economic inactivity, by allowing lead authorities to spend year 2 funding on people and skills. This was despite many areas having already committed many of their funds and unable to make full use of the new flexibility.

While many lead authorities have chosen not to continue with ESF programmes because what was on offer no longer matched their local areas’ needs, some are now using UKSPF to deliver their own locally-designed employment and skills schemes. Despite some additional flexibilities, the LGA says there was a missed opportunity for government to let local places develop longer term funded investments which addresses local areas’ specific challenges more effectively than its European predecessor.