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This research project explores 'leader-led relations' in the post-16 education sector. It is informed by, and seeks to contribute to, recent developments in leadership studies. In particular, it goes beyond the narrow 'leader-centric' approach of traditional mainstream studies to draw on more critical perspectives that directly examine the complex dynamics between leaders and led within their specific conditions and consequences. The [first] working paper [indexed at TD/TNC 94.382] emphasised the importance of context for understanding leader-led relations in the UK post-16 education sector. It also outlined some initial findings about the widely perceived significance of leadership in the sector and the broadly preferred leadership style based on consultation. One of the most enlightening findings of our research to date is the extent of staff morale, commitment, dedication and professionalism. Yet, despite these positive findings, we have also discovered a number of key, frequently interwoven 'leadership challenges' for the post-16 sector. These relate to the issues of power, distance and inequality discussed earlier and are now elaborated below. This second working paper seeks to highlight some of the issues that impact negatively on leadership within the sector generally and on staff, students and institutions more specifically. First, it explores the impact of intensified monitoring and auditing on post-16 leadership and leader-led relations. Second, it examines several issues related to inequality (for both students and [further education] FE colleges) that constitute significant 'leadership challenges' and barriers to effective leader-led relations. Third, this paper offers specific recommendations that we are beginning to feedback into the sector based on the foregoing preliminary empirical analysis.