NEWS

By Janine Marshall, Head of Business Development

For too long, economic growth and tackling low pay have been positioned as competing priorities. The assumption has been that improving job quality, pay, and security inevitably increases costs for businesses and slows productivity.

Recent analysis from the Economics Observatory challenges this view. Drawing on evidence from across labour markets, skills and regional policy, it shows that there are clear and practical policy approaches that can boost productivity and growth while also improving outcomes for people on low incomes – not by accident, but by design.

This is an important message not just for policymakers, but for businesses, investors and growth‑focused organisations.

Productivity, Pay and Business Growth Are Linked

The UK’s productivity challenge has existed alongside a rise in insecure and low‑paid work. Around one in five workers now experiences severe job insecurity, with strong evidence linking this to poorer health, lower engagement and reduced productivity.

From a business development perspective, this represents a structural constraint on growth. Organisations rely on skilled, motivated and stable workforces to innovate, adapt and compete. Where people are locked into low‑quality roles with limited progression or training, businesses struggle to build capability and scale effectively.

The Economics Observatory highlights five areas with the potential to deliver a ‘double dividend’ for growth and inclusion:

• support for small and medium‑sized enterprises
• pay transparency
• improved recruitment practices
• stronger local and regional leadership
• targeted investment in training and skills

These are not abstract policy debates; they go directly to the fundamentals of business performance and long‑term economic resilience.

SMEs, Skills and Regional Growth

Small and medium‑sized enterprises are the backbone of the UK economy, particularly outside London and the South East. Yet many SMEs face structural challenges in accessing skills, finance and workforce development support.

Evidence shows that when SMEs are better supported to invest in job quality, skills and management capability, productivity improves and staff churn reduces – strengthening both individual businesses and local economies.

At the same time, participation in workplace training has declined over the last two decades, with the sharpest falls among younger and less‑qualified workers – the very groups most likely to be in low‑paid or insecure roles. Without action, this risks entrenching skills shortages and holding back growth in key sectors.

STEM Skills and the Future Workforce

Nowhere is the link between inclusive growth and productivity clearer than in STEM skills.

Across sectors such as advanced manufacturing, digital and tech, engineering and the net zero economy, persistent STEM skills shortages are already limiting business growth and innovation. At the same time, people from lower‑income backgrounds remain underrepresented across many STEM pathways, restricting both social mobility and the available talent pool.

Our work, focused on STEM engagement, skills development and employer collaboration, is designed to address this challenge directly. By broadening access to STEM careers, supporting progression into higher‑value roles and helping employers shape skills provision around real demand, it is possible to strengthen productivity while also opening up better‑paid, more secure employment.

This aligns closely with the Economics Observatory’s emphasis on training, recruitment and place‑based solutions as drivers of both growth and equality.

Investment in STEM skills is not simply an education priority; it is a long‑term business growth strategy.

Growth That Works for Places and People

A further key insight from the Economics Observatory is the value of local leadership and devolved decision‑making. Labour market challenges vary widely across regions, and national policy alone cannot always respond to local needs effectively.

Empowering local partnerships – bringing together employers, skills providers and public bodies – enables more tailored recruitment, skills development and workforce solutions. These place‑based approaches can improve retention, strengthen local supply chains and support sustainable regional growth.

Crucially, this is not about slowing businesses down. It is about removing the structural barriers that limit productivity and prevent people and organisations from reaching their full potential.

A Clear Case for Inclusive Growth

The central message from the evidence is clear: growth strategies that ignore job quality, skills and workforce security are unlikely to succeed in the long term.

For businesses, investors and regional economies, inclusive growth is not a “nice to have” – it is a competitive advantage. Targeted action on skills, particularly in STEM, alongside better recruitment practices and local leadership, strengthens the foundations for innovation, productivity and long‑term growth.

The Economics Observatory’s analysis reinforces what many forward‑looking organisations are already demonstrating in practice: boosting growth and improving opportunities for people on low incomes can – and should – go hand in hand.

There are also practical examples of this approach already operating regionally. In the North East, Shine North East is a mayor-backed employer accreditation scheme that recognises organisations leading with fairness, opportunity and respect, while in the Liverpool City Region, the Fair Employment Charter promotes fair pay, secure work, employee voice and progression. Together, these initiatives show how local leadership can help turn the principles of inclusive growth into visible standards for employers and better outcomes for workers. RTC North’s own accreditations and people-centred approach reflect the same wider commitment to fair, inclusive and responsible employment.

Follow RTC North to stay up to date with our work in STEM and helping to close the skills gap.