FSB Wales calls for Welsh political parties to develop ’Foundational Economy 2.0’ for the next Parliament

The foundational economy is central to Wales and to Wales’ future says Wales’ leading business group.

Things such as the food we eat, the nurseries to which we send our children and the pipes that carry water to homes across the country are all parts of the foundational economy. The economic crisis caused by the Covid-19 virus has put this in stark terms – whilst many businesses have been closed, those that we rely on for our day-to-day lives have stayed open. These sectors quite often have large proportions of SMEs that are visible in almost every community across Wales; they are the nurseries, dentists, care homes, butcher shops, food producers that we all value and that have kept our standard of life high, despite the challenges posed by the pandemic.

FSB Wales’ new paper Foundational Economy 2.0 challenges all political parties and the next Welsh Government to push forward on the work that has already been done in regards to the foundational economy. To date, some of this work has fallen under three headings:

1. The Foundational Economy Challenge Fund – This experimental fund invited proposals for pilots in foundational sectors with a value up to £100,000. 52 have been awarded across diverse issues such as social care, procurement and housing and a community of practice is being formed to share learning.
2. CLES+ Procurement with PSBs – the Centre for Local Economic Strategies (CLES) has been brought in to provide support for four PSBs to help them act as ‘change makers’ and influence public procurement to help retain wealth locally.
3. Building the Missing Middle ­– A shift in emphasis towards developing the cohort of medium-sized firms in Wales. This has focused on the redesign of the Business Wales contract for 2021 to date.

FSB Wales now argues that in order to step this up a gear, a clear priority must be to grow Welsh businesses.

The paper identifies three key areas for growth:

Housing decarbonisation

The 30 year housing decarbonisation programme – which focuses on existing housing stock – should focus on ensuring the opportunities are open-to-all and that procurement practices enable smaller businesses to provide work for the programme. Furthermore, business support would be used to encourage companies in Wales to increase their capacity, developing skills and products to help meet the challenges of domestic housing decarbonisation and grow and become more productive in the process. Such an effort would do much to mainstream decarbonisation as a business growth activity in Wales and develop new opportunities for decarbonisation. 

Food procurement

Focusing on food procurement with a detailed and concerted foundational economy approach would mean that we can adapt the current approach to food away from raw growth figures and towards a more granular and diverse understanding of the sector. This would mean looking to encourage more SME food producers by helping provide a route to market and ultimately onto the plate for those companies.

Social care 

There should be an economic strategy for the social care sector. Such a strategy would look at the levels of funding needed to ensure viable businesses are able to grow, employ staff on decent salaries and encourage career progression. Too often, existing funding structures constrain such Given the diversity of provision in the sector, this will require close working with SME care providers and encouragement to ensure that they’re able to grow with expanding provision in a sustainable way over the long-term.

Ben Francis, FSB Wales Policy Chair, said:

“The businesses that make up this sector are at the foundations of everything that we do in Wales. In recent months, we have seen just how vital the foundational economy is, and how the business owners and their employees within this sector have gone above and beyond to keep our country running through immense challenges.

“Now is the time for us to kick the conversation around the foundational economy up a gear. Welsh Government has done good work on this in the past but we can do better.

“By further developing this approach and turning it to economic advantage, we can both develop the answers that many sectors of the economy need to be assured of a sustainable future, whilst also growing the Welsh companies that guarantee jobs, investment and growing our regional economies.

“We know that the current crisis will have long-term impacts on our economy and our communities. What is required therefore, is a long-term policy response. This must be a response which develops and embeds action on the foundational economy – a response which helps promote stability and engages the businesses which are central to the growth of our economy.”