Across sectors, organisations are investing in digital transformation, exploring AI-driven efficiencies and seeking new opportunities to scale. Yet for many employers, particularly those outside the UK’s major economic centres, the biggest obstacle to growth is not demand, competition or access to capital. It is access to talent.
A new report from The Open University called ‘In from the Cold‘ highlights the scale of the challenge. More than a third (35%) of employers in higher education (HE) “cold spots” have had to turn down work, contracts or investment opportunities because they could not recruit the right skills locally. At a time when productivity and innovation are critical to the UK’s economic future, that finding points to a deeper structural issue: growth is increasingly constrained by skills capacity.
When talent shortages become a productivity problem
For business leaders, HE cold spots should not be viewed solely as an education issue. They are an economic issue with implications for competitiveness, resilience and long-term prosperity.
“A higher education cold spot can be defined in various ways, but for our report we define them as an area where relatively low numbers of undergraduate students are studying compared with the size of the local population,” says Professor Mark Durkin, Pro Vice-Chancellor, Partnerships and Enterprise at The Open University. “Cold spots can deprive individuals of the opportunity to fulfil their potential, create skills gaps for employers and undermine regional and national productivity and growth.”
Many of these areas are found in remote rural and coastal communities, although they can also exist within urban centres. Often shaped by factors such as geography, transport infrastructure, economic deprivation and historical patterns of industrial decline, they create conditions where employers struggle to access the skilled workforce needed to innovate and grow.
The consequences are already being felt and the problem extends beyond a simple shortage of qualified candidates. More than half (53%) of employers in cold spot areas say they face competition for talent from larger employers, while 55% report losing out to organisations in other regions. For businesses already operating in smaller labour markets, attracting and retaining skilled workers can become a constant battle, limiting their ability to expand, innovate and respond to new opportunities.
“The fact that more than a third of employers are turning away work, contracts or investment proves that growth isn’t necessarily being held back by demand, but by capacity,” says Durkin. “Some businesses simply can’t scale because they don’t have access to the talent they need.”
The race for digital and AI capability
The skills gap is also changing shape as the landscape evolves. Digital and AI capabilities emerged as the most significant skills gap identified by employers in cold spot regions, ahead of creative skills, professional services expertise, finance and sustainability skills. In practice, digital capability is becoming part of almost every role. As organisations embrace AI and automation, skills that were once considered specialist are becoming fundamental business capabilities.
“Digital and AI skills are no longer just for tech companies,” says Durkin. “Whether it’s using data more effectively, automating processes or improving customer experience, these capabilities are becoming essential across the majority of sectors.”
The risk is more acute for organisations operating outside established technology hubs. As AI adoption accelerates, businesses that cannot access the necessary skills risk falling further behind their competitors, creating a widening gap between regions that can attract talent and those that cannot.
The problem is compounded by wider structural inequalities. Housing affordability, transport connectivity and graduate migration all influence where people choose to live and work. For many employers, these factors create recruitment challenges that are difficult to overcome through traditional hiring strategies alone.
“An increasing number of graduates are moving to bigger cities for work,” says Durkin. “It becomes a vicious circle: talent leaves, employers struggle to recruit, and local economies find it harder to grow.”
Unlocking the hidden workforce
For years, many organisations responded to skills shortages by competing harder for external talent. Increasingly, however, employers are recognising the limitations of this approach. Instead, they are turning their attention inward.
The Open University’s report found that almost two-thirds (63%) of employers in cold spot areas are often surprised by the ‘hidden talent’ already present within their workforce. This suggests that the solution to talent shortages may not always lie in finding new people, but in developing existing ones.
“It shows a growing recognition that what the talent organisations need is often already there – it just might be hidden,” says Durkin. He adds that with fewer options to recruit externally, more employers are beginning to invest in their existing people, recognising that capability can often be developed faster and more sustainably from within.
This changes the workforce equation as strategies move from buying talent to building talent. Rather than relying exclusively on recruitment, organisations are increasingly focused on creating pathways for reskilling, upskilling and internal progression. In an environment where skills requirements are changing rapidly, this approach can deliver both greater resilience and a stronger return on workforce investment.
The growing appetite for flexible learning reflects this trend. More than three-quarters of employers surveyed said employees would be more likely to undertake training if flexible learning options were available, while almost three-quarters expressed interest in higher education qualifications delivered through local further education colleges.
For employers, the attraction is clear. Flexible learning enables people to develop higher-level skills without stepping away from work, while helping organisations address capability gaps without losing valuable experience and institutional knowledge.
The talent organisations need is often already there – it just might be hidden
“Flexible, tutor-supported online learning models mean people can upskill themselves, whilst having a full-time job, and still have a good work-life balance,” says Durkin. “It allows people to gain new skills without having to give up work or move away to study.”
At a strategic level, this points towards a more collaborative model of workforce development. Rather than viewing talent acquisition as a standalone HR challenge, organisations are increasingly working alongside universities, colleges and training providers to shape the skills they need.
“In the majority of higher education cold spots, you simply can’t recruit your way out of the problem,” says Durkin. “That’s why partnerships are so important. They allow employers to work directly with universities and colleges to shape the kind of skills being developed.”
One example is Cornwall Council, where a partnership with The Open University has helped address long-standing social worker recruitment challenges through a partnership model that combines flexible online-first academic learning with practical placements arranged by the council . More than 100 social workers have qualified through the programme, with the vast majority remaining with the council.
Such partnerships can help create locally relevant talent pipelines while supporting broader regional growth objectives. They also enable organisations to align learning more closely with emerging business needs, whether that involves digital transformation, sustainability initiatives or sector-specific expertise.
From talent acquisition to talent creation
For employers, the priority now is to move beyond short-term hiring cycles. Addressing regional skills shortages will require a shift in mindset from short-term recruitment to long-term talent development. It will mean investing in people already within organisations, widening access to learning opportunities and building stronger connections between employers and education providers.
The UK’s growth ambitions depend not only on innovation and investment, but on ensuring that opportunity and skills development are distributed more evenly across the country. Yet talent shortages will not be solved by recruitment alone. Creating stronger local skills pipelines and widening access to learning will be critical if organisations are to unlock growth in every region of the UK.
“Collaboration is vital,” says Durkin. “We need to ensure employers in higher education cold spots can develop the skills they and their communities need. Talent is everywhere, but opportunity is not. The more effectively we can close that gap, the stronger and more competitive the UK economy will become.”
Read the full Open University report and view maps of higher education cold spot areas
Across sectors, organisations are investing in digital transformation, exploring AI-driven efficiencies and seeking new opportunities to scale. Yet for many employers, particularly those outside the UK’s major economic centres, the biggest obstacle to growth is not demand, competition or access to capital. It is access to talent.
A new report from The Open University called 'In from the Cold' highlights the scale of the challenge. More than a third (35%) of employers in higher education (HE) “cold spots” have had to turn down work, contracts or investment opportunities because they could not recruit the right skills locally. At a time when productivity and innovation are critical to the UK's economic future, that finding points to a deeper structural issue: growth is increasingly constrained by skills capacity.
