London's Local Skills Improvement Plan 2026-2029: Ensuring that the capital's skills system meets the needs of London's jobseekers, employees and businesses

21st August 2026 by Monet Durieux

Background

Local Skills Improvement Plans (LSIPs) are statutory documents prepared by Employer Representative Bodies and Strategic Authorities, covering a three-year period, that support local skills development, facilitate employer engagement and deliver change in the supply of technical education and training.

London’s first Local Skills Improvement plan was launched in 2023, in a world emerging from the Covid pandemic. However, the labour market has changed since the last plan was produced. The city faces increasing unemployment, particularly among young people and a rise in number of individuals who are NEET (Not in education employment and training). In addition, slowing jobs growth and hiring activity complicates access to employment for these demographics. The rising influence of Artificial Intelligence (AI) and growing uncertainty due to geopolitical events adds to the complexity of the situation.

Against this backdrop, the updated Local Skills Improvement plan (LSIP) for London for the period 2026-2029 was published in July 2026. The plan is focused on a system-wide change to improve the “matching between training provision and employer demand, boosting pay, productivity, and workforce inclusion across the capital, addressing skills gaps and ensuring businesses have the skills they need to grow”.

For the first time, the delivery and monitoring of the plan is the joint responsibility of the GLA and BusinessLDN, in partnership with sub-regional partnership (SRPs) and other Employer Representative Bodies such as the Federation for Small Business and the London Chamber of Commerce and Industry. This ensures that the plan is aligned with other strategic policies in London such as the Inclusive Talent Strategy and utilises structures such as Sector Talent boards and hubs to engage with employers to direct training provision.

A wide range of stakeholders were consulted in developing the plan, including employers, training providers and Londoners. This blog summarises the key elements of the evidence base behind the plan.

London’s Local Skills Improvement Plan 2026-2029

The plan identified four cross-cutting themes that should be prioritised. These were digital, green, and transferable skills and labour market inclusion, areas that continue to be priorities for London’s labour market.

The plan further sets six priority areas for action over the period 2026-2029:

Strengthen transferable, digital & AI, and green skills
Build clear, inclusive pathways into priority sectors
Expand modular, stackable and flexible training
Improve employer engagement (especially Small and Medium-sized Businesses (SMEs))
Increase access to work experience and employability support
Enhance strategic coordination and labour market insights

While the first LSIP went some way in supporting improved collaboration between employers and training providers in, for example, co-designing curriculum, the LSIP 2026-2029 consultation highlighted that there are still persistent challenges in accessing training due to lack of communication and awareness of provision as well as difficulties in navigating the skills system by employers.

Findings from the LSIP evidence base

To support the refresh of the plan, GLA Economics produced an updated evidence base. The evidence base sets out trends in London’s labour market and skills landscape since the previous plan in 2023.

London’s labour market at a glance

This chapter of the evidence base reveals a slowdown in job creation and hiring since 2022, both of which have particularly affected London. Structural features continue to shape skills and workforce challenges in the capital, with London’s economy remaining characterised by a large number of small businesses, a high reliance on migrant workers in several priority sectors, and persistent employment gaps for some groups of Londoners, all of which remain relevant for the LSIP refresh.

Bar chart of the 16-64 employment rate for select groups of London residents in the 12 months to March 2025, against an overall average of 75%. Rates range from 85% for those aged 25-49 down to 59% for disabled Londoners, 60% for those aged 20-24 and 16% for those aged 16-19. Male employment (80%) exceeds female (70%), and rates vary across ethnic groups from 80% for White Londoners to 65% for those of mixed or multiple ethnicity. — Figure 1: Employment rates vary widely across groups of Londoners. Source: ONS APS. Note: low rates for 16–19 largely reflect participation in full-time education.

London’s skills supply landscape

London has a highly qualified population and strong progression into higher levels of education. However, apprenticeship participation in London remains low and is increasingly concentrated among learners aged 25 and over and higher-level apprenticeships. Further education and adult skills continue to support intermediate skills development and reskilling, though overall learner participation has fallen since the previous LSIP. Further details can be found in the evidence base for the Inclusive Talent Strategy.

Bar chart of the share of residents aged 16-64 qualified to level 4 and above in 2024: 47% in England, 62% in London, and across London sub-regions 69% for Central London Forward, 62% for South London Partnership, 60% for West London Alliance and 54% for Local London. — Figure 2: Higher-level qualification attainment is higher in London than England overall, but still varies across sub-regions. Source: GLA Economics analysis of ONS APS.

Data also shows that employer spending on training has fallen despite ongoing participation and evidence of skills needs among the existing workforce. Investment in training per employee, adjusted for 2024 prices in London declined from £2,350 in 2022 to £1,810 in 2024; down from a high of £2,930 in 2015. Research at a national level suggests that falling spending on training reflects a wide range of supply-side factors, including rising cost pressures and constraints on employers’ capacity to plan and deliver training, rather than reduced demand for skills. Delivery models and attitudes towards training have also evolved over time, potentially shifting more responsibility onto individuals.

Skills demand and alignment

By 2024, vacancy rates were close to longer-term averages, with more recent data suggesting a further slowdown in demand during 2025. Most vacancies in London are not reported as hard-to-fill. However, a large share (24% of vacancies) continued to be affected by skills shortages in 2024, indicating persistent mismatch in parts of London’s labour market. For example, at the England level, skills shortage vacancies (SSVs) density remained relatively high in several priority sectors, including construction and parts of business services (Sector-level SSVs are not available for London for 2024).

Table of selected skills-shortage vacancy indicators for London from 2011 to 2024. The number of SSVs rose from 14,000 in 2011 to a peak of 94,000 in 2022 (32% of vacancies) before falling back to 46,000 in 2024, when 6% of sites had at least one SSV and SSV density was 24% of vacancies. — Table 1: Nearly a quarter of vacancies were reported as Skills Shortage Vacancies (SSVs) in 2024, indicating persistent skills mismatch even as overall recruitment eased. Source: DfE Employer Skills Survey. Table created with Datawrapper. Note: SSV density is defined as the percentage of total vacancies considered hard to fill due to skills shortages.

Skills gaps within the existing workforce increased after 2019 and remained elevated in 2024, affecting around 5.6% of the workforce. This points to growing challenges around workforce capability, not just recruitment alone.

Table of selected skills gap indicators for London from 2011 to 2024. Employees with a skills gap fell from 234,000 in 2011 to 160,000 in 2017, then rose to 310,000 in 2024, when 11% of sites reported at least one skills gap and skills gap density stood at 5.6% of employment. — Table 2: Even as recruitment pressures have eased, skills gaps within the London workforce remained elevated in 2024. Source: DfE Employer Skills Survey. Table created with Datawrapper. Note: skills gap density is defined as the share of employees reported by employers as not fully proficient in their role.

Since the last LSIP, advances in generative AI have accelerated. London’s concentration of higher-exposure roles suggests impacts on task content and skills requirements may be felt more strongly than elsewhere, with 46% of London jobs exposed to generative AI, compared with 38% UK-wide.¹ Using data on recruitment activity shows that demand for AI-related skills has increased sharply to around 7% of all online job postings in early 2026, and continues to rise.

Skills needs and opportunities in London’s priority sectors

The evidence base includes a detailed analysis of London’s six priority sectors, aligned to the London Growth Plan, namely construction and the built environment, creative industries, health and social care, hospitality, finance and professional services and life sciences.

The chapter detailed the skills needs and recruitment challenges that these sector face. It also profiled those working in the sector showing demographic changes, the prevalence of non-UK-born workers and exposure to digital technologies such as AI.

The analysis identified priority occupations and skills in demand for these sectors. It showed that hospitality, construction and professional services jobs are expected to grow at a faster rate than the London average between 2025 and 2035, while for example, the financial and professional services sector face high exposure to AI.

Table profiling jobs, businesses, pay and projections for London's priority sectors. Professional services has the most employee jobs (1,153,000 in 2024) and registered businesses (148,200 in 2025); median annual pay in 2024 ranges from £22,200 in hospitality to £80,600 in financial services against a London average of £41,600; projected annual jobs growth for 2025-2035 is fastest in hospitality (2%) and construction (1.4%) against a London average of 0.5%. — Table 3: Priority sectors at a glance – jobs, businesses, pay and projections. Source: ONS BRES, 2024, via Nomis; Business Counts (local units), 2025, via Nomis; ASHE (2024, 2022, 2019 – place of work); DCMS (2025) Economic Estimates: Earnings 2024 for DCMS Sectors; Department for Education (2025) Labour market and skills projections: 2020 to 2035.

Table of qualifications and skills indicators for London's priority sectors. Degree-or-equivalent qualification shares range from 28% in hospitality to 81% in creative industries and financial services against a London average of 62%. Skills shortage vacancy density in 2024 (England) is highest in construction at 46%; workforce skill gap density is around 4-6% in each sector. The proportion of jobs exposed to generative AI ranges from 19% in construction to 78% in financial services against a London average of 46%. — Table 4: Priority sectors at a glance – education and skills, AI exposure. Source: ONS Annual Population Survey, pooled 2022–2024 (place of work); DfE (2025) Employer Skills Survey 2024; GLA Economics analysis of ILO (2025) AI exposure. Note: ‘---’ estimate unavailable; ESS 2024 estimates are England-level for sectors and for the London average.

While the development and finalisation of the plan occurred at the beginning of 2026, the LSIP aligns well with the recent recommendations to the Mayor from the London AI and jobs taskforce which focuses on three capabilities:

Act Early – identify emerging labour-market risks and opportunities before they become entrenched. The LSIP focuses on ensuring that Londoners have the skills that are demanded by employers and that there is improved labour market information for decision making by employers and job seekers.
Shape Change – work with employers, workers and educators to redesign work in ways that strengthen productivity and expand opportunity. The LSIP was initiated to improve co-ordination across these three stakeholder groups to support better training provision and build on existing strategies such as the Inclusive Talent Strategy and sector talent boards.
Create Opportunity – build new pathways into good work so more Londoners can benefit from the AI economy. The cross-cutting themes of the plan emphasises the importance of labour market inclusion for all Londoners.

Conclusion

The LSIP 2024-2026 builds on the first plan published in 2023. It aims to develop a skills system which works better for employers, training providers and Londoners. However, the labour market in which the plan needs to deliver these ambitions is considerably different from that back in 2023. In addition, structural challenges such as unequal access and poorer labour market outcomes for certain Londoners remain a feature of the city.

The updated plan aims to ensure better co-ordination and that all skills policies are aligned through ensuring joint responsibility for the delivery of the plan by BusinessLDN, the GLA and sub-regional partnerships (SRPs).

1. GLAE, London’s workforce exposure to generative artificial intelligence, April 2026.