LSIPs are closing the skills gap, but the system’s still out of sync

Almost one million young people in England are not in education, employment or training (NEET). But our research shows that almost three‑quarters of businesses are facing skills shortages. That is a profound mismatch between our education and skills system and the labour market.

Local Skills Improvement Plans (LSIPs) were created to help close this gap. We’ve analysed if they’re doing the job they were designed to do – whether employers and providers are now working together to create local skills provision based around real jobs, in growth sectors with high demand.

Employers are engaging at scale

Of the 39 LSIPs in England, 33 are led by Chambers of Commerce. They sit at the heart of their local business communities and are trusted by employers of all sizes and sectors.

In just the first few months of delivery, LSIPs engaged more than 65,500 small and medium-sized businesses – many for the first time. These are firms that had previously found the skills system fragmented, opaque and hard to influence. LSIPs are translating that system for employers and driving behaviour change. Firms are beginning to think more strategically about their medium and long-term skills needs, rather than firefighting immediate gaps.

Employer insight is now directly shaping college provision and helping to create clearer, more credible pathways into work for young people.

Prevention better than cure

But the research also found that prevention needs to start earlier. Evidence from LSIPs consistently shows that young people – and often their teachers – lack awareness of the full variety of local job opportunities available. This is particularly true in priority growth sectors such as manufacturing, construction, life sciences and the green economy.

Time-strapped teachers clearly don’t have the capacity to investigate their local economies in forensic detail. But there is a clear opportunity to apply the principles of LSIPs more widely, including to careers information, advice and guidance before age 16.

Shaping learner demand around real labour‑market opportunities earlier would raise aspirations, improve take‑up of technical routes and reduce drop‑out later on.

Pathways, progression and productivity

Another recurring message from LSIPs is that skills planning cannot stop at entry level. Employers are clear that strong career progression pathways are vital for retention, productivity and workforce resilience.

The introduction of foundation apprenticeships is a positive step, creating new entry routes at level 2. But this must sit alongside a strong offer at higher levels. Almost all LSIPs identify cross-cutting skills such as leadership and management as critical. Yet higher-level and management apprenticeships are being squeezed at precisely the moment businesses need them most.

This is short‑sighted. Well‑trained managers are essential for supporting young people in work, particularly those who need additional pastoral support. These apprenticeships are also a key progression route for existing staff. Defunding them weakens productivity and closes off opportunities.

Cost pressures cannot be ignored

Feedback from LSIPs also gives voice to a harder truth. Businesses want to invest in young people and their workforce, but employment costs have risen sharply – seven out of ten businesses are feeling pressure from labour costs. Taking on a young person who may not be fully productive for months and needs additional pastoral support, is a significant financial risk for a small firm.

Larger employers are paying into the levy, yet experiencing less flexibility in return, as apprenticeships are streamlined and funding rules changed. Without action to ease these cost pressures, tweaks to skills policy alone will not be enough.

When partnership works, it really works

But all is not lost. Where employers and providers work together, the impact is striking. From advanced manufacturing to creative industries, LSIPs have unlocked capital investment, curriculum reform and new employer/provider partnerships that simply did not exist before.

Initiatives such as the Young Chamber programme, led by the West Cheshire and North Wales Chamber, show what is possible when local leadership, business engagement and education align. Through industry-specific workshops, a career passport to develop essential employment skills, and an enterprise challenge, the programme helps students build confidence, understand workplace expectations and develop skills valued by employers. In two years, local employers contributed 226 business hours to the programme, benefitting 3,128 pupils.

The message from the Chamber network is clear. LSIPs are working. But to deliver their full potential, they need long‑term stability. That means multi‑year funding, clearer integration with skills and careers policies and the confidence to embed employer leadership for the long haul.