New £1.5m package is announced to finance projects

Welsh Government Deputy Minister for Economy and Transport Lee Waters on the foundation economy and measures to support its growth

A NEW £1.5m fund to support the foundational economy has been announced by the Welsh Government.

The foundational economy, which accounts for around 40% of jobs in Wales, describes the organisations, SMEs, micro-businesses and social enterprises that are rooted in local communities and deliver the goods and services people need.

Deputy Economy Minister Lee Waters said: “Care, food, housing, energy and construction are just some of the sectors that make up our Foundational Economy. They are the industries and firms that are in our communities because our people are there.

“Accounting for around four in ten jobs, and around £1 in every three that we spend, these firms already make up a significant part of our economy. By nurturing and growing them further, I believe we can go a long way towards increasing wellbeing and improving the quality of people’s lives, and addressing some of the issues and concerns that were expressed by many communities in their response to the Brexit referendum.

“Our new £1.5m fund will test innovative ways of supporting and growing our foundational economy so that we can spread good practice right across Wales. I want it to fund experimental projects that are collaborative and innovative and challenge the conventional ways of doing things.

“By providing space and support for projects that challenge the status quo I want to empower local government, wider public and third sector and business to work together in order to drive and retain local wealth.

“This is about developing creative solutions to local challenges that really do deliver for our communities.”

The £1.5m was secured as part of a two-year budget agreement with Plaid Cymru and will open for applications in the next financial year.

IN ALL the debate about the impact of Brexit, it’s important we don’t lose focus on what led to a majority of people in Wales voting to leave the EU, and what we must do to address their cry of pain.

Communities like the one I represent in Llanelli used the referendum to articulate a sense of frustration that we were being left behind – a feeling that we are expected to absorb the downsides of globalisation without feeling many of the upsides celebrated by the winners from free trade and open borders.

The way our economy has developed has been undeniably uneven. Cardiff is the only part of Wales to match the UK average levels of wealth. While London and the south east of England has flourished, the rest of the UK has struggled. But it’s no use living in one of the wealthiest parts of the UK if housing consumes over half your income – as might happen in Greater London. Meanwhile, in Wales far too many people are working in low-pay, low-security jobs and live in homes that harm their health and wellbeing.

And though we can point to historically healthy levels of employment, this is to fundamentally misunderstand the way that many Welsh communities feel after decades of deindustrialisation. Given that 40% of people in Wales living in poverty are in employment, it’s simply no longer true that work alone is the best route out of poverty.

Mark Drakeford’s election as First Minister has signalled the need for a new emphasis on nurturing and growing the everyday parts of our economy, with a focus not just on the economic outputs but on the quality of people’s experience of everyday life.

The Welsh Government’s Economic Action Plan has already set the direction with a shift away from a sector approach to economic development to one focused on place – making the communities we live in stronger and more resilient. It places a greater emphasis on tackling inequality and signals a shift away from big grants to a “something for something” relationship with business.

The next step in that approach is to nurture and grow the foundations of our local economies. Care, food, housing, energy, construction are all examples of the foundational economy. The industries and firms that are there because people are there. The food we eat, the homes we live in, the energy we use and the care we receive: those basic services on which every citizen relies and which keep us safe, sound and civilised.

These aren’t small parts of our economy. They account for four in 10 jobs, and £1 in every three that we spend. Indeed, in some parts of Wales this basic “foundational economy” is the economy.

Not only are these parts of the economy critical to our wellbeing, because the interruption of their supply undermines safe and civilised life, but they are also more resilient to external economic shocks. Even if a change in the global economy tips the attitude of a large multi-national company against investing in Wales, the foundational economy remains. And nurturing it is within our power – the levers are devolved, and can be pulled relatively quickly.

If we get it right, the foundational economy approach offers the chance to reverse the deterioration of employment conditions, stop the leakage of money from our communities and reduce the environmental cost of extended supply chains. For example, in the care sector by linking investment to fair pay and career development.

What’s more, investing in the foundational economy allows us to spread benefits into those communities where it has proved difficult to attract large companies – communities that in many cases turned to Brexit to express their feelings of dislocation.

The Welsh Government’s support for the foundational sector will emphasise keeping successful firms locally rooted, and building a firm base of medium-sized Welsh firms.

Business support has often concentrated on firms that are able to grow quickly and provide relatively large numbers of jobs, but also firms that are relatively volatile and can be quick to fail. We need to move our focus to the harder task of creating sustainable firms that might grow more slowly, but act responsibly within their supply chains and are able to withstand economic shocks.

Matching the commitment we give to the large “anchor companies” that employ more than 1,000 people in one place, with an equal emphasis on local “anchor institutions” and the network of disparate and scattered local firms, has the potential to nourish the fabric of the communities that have felt left behind.

Our aim must be to increase the number of grounded firms (both micro firms, SMEs and co-ops, community interest companies) which are capable of selling outside Wales, but have decision-making rooted in