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 published today.

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.

Demos is calling for a shift in how local economies are organised, with government backing for stronger local business partnerships, simpler engagement with councils, and better shared data on skills and jobs.

Liam Byrne MP, Chair of the Business and Trade Committee said:

“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.”

Dan Goss, Lead Researcher at Demos said:

“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.”

Lynne Peabody, CEO at young people charity EY Foundation who funded the research said:

“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.” 

– ENDS –

About Demos

Demos is Britain’s leading cross-party think-tank and a registered independent charity. Demos’s mission is to upgrade democracy in the UK through conducting research and innovating with citizens, experts and politicians to devise fresh policies and democratic practice – whilst drawing on strong, established networks.

Demos’s work focuses on four key areas that span the interface between state and citizen: Everyday Democracy, Public Service Reform, the Citizen Economy, and Resilient Information Ecosystems – with technology and AI shaping each.

Demos has spent three decades cementing a place as a trusted expert, political convener and generator of ideas. Movements, ideologies and governments have come and gone. Yet in this moment of global democratic emergency, Demos’s work could not be more urgent or relevant.

Notes to Editors

Methodology

Findings are based on a series of case studies conducted between December 2025 and February 2026, interviews with leading policy experts, and a survey of 500 UK SMEs in March 2026.

Media Contact

Lottie Skeggs, Communications Manager, Demos

Phone: 07881029586

Email: [email protected]