Education ‘cold spots’ stifling local growth, new report warns

As UK organisations seek to drive growth in a challenging economic climate, a new report from The Open University reveals how employers based in higher education (HE) cold spots are losing out due to a lack of skills and competition from other regions. Over a third (35%) have had to turn down work, contracts or investment opportunities because they could not recruit the right skills locally, limiting the ability of employers to scale and innovate.

The report, based on a survey of employers in cold spots of low levels of higher education participation across the UK, reveals that competition for talent is intensifying these pressures. More than half (53%) of employers in cold spot areas say they face competition for talent from larger employers and in other regions (55%), making it harder for local businesses to attract and retain skilled workers. As a result, one in two employers (50%) say the immediate need to address skills shortages prevents them from focusing on diversifying their workforce, reinforcing long-term inequalities in access to opportunity.

Cold spots, which emerge due to a variety of factors including local transport, geography, deindustrialisation, economic deprivation, are contributing to lower national productivity which is being driven by regional skills gaps and high recruitment costs for experienced and skilled talent. The number of young people who are currently NEET (not in education, employment or training), have seen a stark increase with nearly a million people aged 16-24 falling into this category in December 2025. The specific skills gaps faced by employers in higher education spots are restricting organisation’s ability to adapt to new technologies, widening the skills gaps and undermining the growth of the economy as a whole.

The top five reported skills gaps are:

Employers in cold spots trying to fill these skills gaps report multiple barriers to attracting new talent or retaining existing skilled workers. These include place-based challenges such as affordability of local housing (22%) and transport and commuting options (22%) limiting the access to talent for employers and, in turn, holding back growth.

In response to these challenges, many employers are looking locally, with just 6% looking outside the area for talent. Nearly two in five (39%) organisations rely primarily on in-house training or upskilling programmes to develop talent, yet the findings suggest a strong appetite for more flexible solutions. Over three in four (78%) of employers agreed that employees would be more likely to undertake training courses if flexible learning options were available, and over seven in ten (73%) would be interested in HE-level courses delivered through local Further Education (FE) colleges. Additionally, the findings suggest significant untapped potential within existing workforces with almost two thirds (63%) of employers say they are often surprised at the ‘hidden talent’ of employees, indicating the benefit of flexible learning to help unlock diverse talent pools existing in businesses.

In some parts of the UK, access to skills is a daily challenge for employers as talent is everywhere but opportunity is not. Skills shortages are holding these businesses back – leading them to turn down work, struggle to grow or lose talent to larger employers in other regions.

The Open University was founded on the principle of opening up higher education for all. For well over five decades, we’ve helped employers and individuals develop the skills they need, regardless of where they are located or their educational background. There is huge potential for employers to work with flexible further and higher education providers to widen access to learning through meaningful partnerships to tap into existing, hidden talent. Collaboration is vital to ensure employers in HE cold spots can develop the skills they and their communities need.

Professor Mark Durkin
Pro Vice Chancellor, Partnerships and Enterprise, The Open University

The report concludes with recommendations for how employers can address the challenge of higher education cold spots to accelerate local skills development including:

• Promoting flexible, online learning through partnerships that minimise the need to travel to classroom-based learning.
• Bringing out the hidden talent from within organisations by widening learning opportunities to more diverse groups.
• Partnering with further education colleges who deliver relevant higher education courses in partnership with a university to fill skills gaps.

For further insights and recommendations, download the full report entitled ‘In From the Cold’.

¹ Source: Office for National Statistics (2026)