Photo of Gary Newman, WKW

Gary Newman, Chief Executive of Woodknowledge Wales expores what the Foundational Economy is, why Welsh Government are interested in it and what it means for the Welsh timber sector.

The Welsh first Minister, Mark Drakeford AM, is increasingly considering Welsh development policy through the lens of the Foundational Economy. I’m also drawn to the Foundational Economy, concerned as it is with the development of local supply chains for the provision of the basic needs that have a huge influence over the quality of life for people in Wales. That means that the activities of our membership can be considered to be part of the Foundational Economy as they are engaged with the provision of housing and the supply of timber products. It is therefore important to understand more.

What is the Foundational Economy?

The term Foundational Economy was first coined by a group of academic economists led by Professor Karel Williams at Manchester University in the early 2010’s. It is now an internationally recognised concept. Foundational economists are concerned with addressing the everyday parts of the economy. The parts that are fundamental to the quality of people’s lives but typically not very newsworthy and often taken for granted – such as utilities, health and social care, education, food and housing. In fact, foundational sectors make up about 45% of the Welsh economy.

There is inevitably considerable debate about what the foundational economy actually is – which sectors are in and which are not. I’m not writing this article as an academic review so I will spare you the detail of that debate. Let’s just say that housing and its supply chains (including timber manufacturing and forestry) are included.

So, the timber construction sector is foundational, but what does that mean?

The short answer is, I’m not entirely sure. But some things are clear. Using the lever of public procurement to support local business is most definitely a foundational economic strategy. The problem here is that public procurement strategies have been a go-to solution for some time and have not led to change in the way that we might have expected. Will liberation from EU procurement rules change that? I remain sceptical, but that is definitely a subject for another day. What’s important here is that there is much more to the foundational economy than the tweaking of public procurement policy.

Developing local supply chains

Lowfield Timber Frames Ltd. Marton, Welshpool

Foundational economic activity desires the development of resilient organisations owned and run in a purposeful way that delivers financial returns for owners, meaningful employment to the local community and wider value to Welsh society. This means that policies need to focus on supporting the right kind of business. Policies that are not simply pro-business, but pro the right kind of business. As a slight segue, there is a strong overlap here with the low carbon agenda. Some businesses are most definitely ‘the wrong kind of business’ and have to go (e.g. fossil fuels), some must shrink (e.g. cement production) and others need to grow (e.g. low carbon timber homes and their timber supply chains)

What is the right kind of business?

Here could start another long discussion, but for me the right kind of business are those that are rooted within the communities that they serve. In the private sector, good examples would be family owned and multi-generational medium-sized enterprises, cooperatives and social enterprises. Who owns the business and what the business is for, really does matter. In the intermediate sector, housing associations are another excellent example. Of course, that does not mean that multinationals and private equity owned firms are not valuable to Wales. It simply means that these types of organisations should not be the centre of attention in strategic policy terms (other than to demand more from them in return for locating in Wales and gaining access to Welsh workers and Welsh markets). It also means that we should be very careful about the tendency to look elsewhere for solutions or silver bullets. I certainly believe that in Wales we have the key ingredients for a vibrant low carbon economy based upon our natural resources. To deliver that, the first thing we need is not money, it is belief.

What is Woodknowledge Wales doing?

The Woodknowledge Wales team certainly don’t view government policies as the only means of change. In fact, we believe that governments often follow with policy after others have successfully demonstrated what’s possible. So, foundational economic thinking, when appropriately articulated, is not only an agenda for Welsh Government. It could certainly also inspire and guide the actions of our network and others operating within the foundational sectors of our economy.

I’ve probably over-simplified the subject. But I’m definitely a believer in the Foundational Economy and its focus on local supply chain development. That said, to get a better grasp on what foundational economic development really means for the Woodknowledge Wales membership and our wider network, we’re working with Karel Williams and his Foundational Economy team. Together we are interrogating the dynamics of the timber construction supply chain, how the sector currently operates and how it could develop to become more purposefully aligned to deliver greater economic, environmental and social benefit.

We will be reporting the findings from this exciting study in the Autumn.

For more reading on the foundational economy I recommend two publications – What Wales Could Be, and topically What Comes after the Pandemic.   There are also a number of relevant articles on the Institute for Welsh Affairs website.