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Stronger links between SMEs, councils and local partners could unlock almost two million apprenticeships and up to £28bn each year in growth, new research finds
Stronger links between small businesses, councils and educators could unlock billions in growth while opening up new job and apprenticeship opportunities for young people - especially those from a low-income background – according to new research by the cross-party think tank, Demos, funded by the EY Foundation.
The report, ‘Economies of Coordination: Unlocking growth and opportunity for young people in Britain’s left-behind neighbourhoods’, warns that Britain’s struggling local economies are being held back by a failure to connect institutions within the same community.
Government intervention to encourage what the report calls “economics of coordination” between small employers and local economies could help unlock growth and opportunities in the same way that bigger organisations benefit from economies of scale.
Drawing on a series of case studies, research with business leaders, and a survey of 500 UK SMEs conducted in March and April 2026, the report finds that better coordination between firms, councils, training providers and public bodies at a local level could deliver a twin boost of economic growth and expanded opportunity for young people.
The potential prize is substantial. Economic analysis by Demos estimates that stronger local partnerships could:
- Boost UK growth by up to £28bn each year, in part through generating 1.9 million additional management apprenticeships
- Increase SME revenues by up to £40bn each year
- Raise productivity across small businesses by up to 9%
Yet this potential is currently going untapped. The research finds that 96% of SMEs are not working with local organisations in at least one key way, such as sharing data on skills needs or partnering on training and outreach. Two-thirds (68%) of SMEs say they face barriers including lack of time, funding and capacity.
The cost of a disconnected local ecosystem
The consequences are often felt most sharply by young people trying to break into the job market. Against a backdrop of high youth unemployment, lack of coordination between employers, educational providers and local authorities is restricting economic growth and opportunity, meaning many young people are struggling to enter local job markets, with those from low-income backgrounds sometimes hit hardest.
Rather than expecting young people to move to large cities, the report argues that policymakers should focus on supporting collaboration at a local level, to bring opportunities to where young people already are – particularly in “left behind” towns and neighbourhoods that report high levels of multiple deprivation and lack social infrastructure.
Speaking about the research:
For too many communities, the slow decline of their high street and local businesses has come to symbolise a deeper economic malaise. My analysis has shown that when places lose their economic heart, people lose confidence in the state and pessimism takes root. Raising productivity in smaller local businesses is therefore not cosmetic. It is central to rebuilding trust and opportunity. By reconnecting local SMEs, freelancers and highstreets into their local economies and wider communities, we can drive that productivity, restore local pride.
Our research sets out a new way of thinking about economic growth. The conventional government strategy of generating economies of scale is important but limited. Smaller firms can instead succeed by tapping into what we call ‘economies of coordination’ – working more effectively with the businesses and institutions around them to tackle barriers to local growth and opportunity. We saw examples from across the country of local businesses pooling their data, insights and resources, with transformative impacts on Britain’s left-behind places. From raising young people’s productivity to helping reduce NEET numbers, the potential is huge. Our report sets out clear, practical steps to unlock those advantages.
This research highlights the vital role that employers, especially SMEs, and policy makers play in advancing social mobility. While policy is crucial, it is clear that success depends on how change is implemented at a local level. By embracing better coordination, employers can help build a fairer society, while driving growth, innovation and opportunity within their own organisations and local communities.
Commenting on the research, members of the EY Foundation’s Youth Voice Forum (YVF) said:
As a young person from Birmingham, this report resonates deeply with me. Too often, the opportunities available to young people depend entirely on where they happen to grow up and in left behind areas, that postcode lottery can define your entire future. What’s compelling about the ‘economies of coordination’ framework is that it doesn’t ask us to wait for a top-down solution; it shows how local businesses, schools, and communities already hold the ingredients for change, they just need the infrastructure to act together. In my own experience seeing young people struggle to connect their ambitions with local opportunities, the gap isn’t talent, it’s connection. When businesses and educators coordinate around shared local goals, young people from low-income backgrounds gain access to the networks, skills, and pathways that others take for granted. This report makes a compelling case that closing that gap isn’t just the right thing to do, it’s an economic necessity.
From my perspective, the issue isn't that young people lack drive, it's that the right opportunities aren't always within reach. When employers and local organisations work more closely together, it makes it easier for young people to see a clear path forward. In my area, that kind of support could help more young people build confidence, develop real skills and step into opportunities that might seem out of reach at first glance.
This concept matters because it recognises that young people lack feasible opportunities despite having the potential to succeed. Better coordination between businesses, education, and local organisations could create clearer pathways into jobs and training, emphasising the importance of transparency and togetherness for the economy. This would create a local economy that feels connected and supportive rather than fragmented.