Economic growth is the primary mission of the current UK government, with more people in good jobs, higher living standards and productivity growth. Yet traditional economic development approaches have been questioned in academic and policy debates about how inclusive and sustainable economic performance can be achieved across the UK.
A recent paper in Urban Studies provides a critical and comparative assessment of five leading agendas that have been positioned as alternative and progressive policy responses to urban economic change: inclusive growth; the wellbeing economy; community wealth building; doughnut economics; and the foundational economy.
Taking an international perspective, the paper provides a comparative review of their stated visions, mechanisms for change, and the spatial scales through which they are led and implemented.
The focus here is on one of these approaches to thinking differently about economic development – the Foundational Economy – showcasing the findings of a Regional Studies paper entitled Facing up to the foundational economy: regional development, public policy and employment in Wales by Paul Sissons and Anne Green published in Regional Studies. The focus on Wales reflects the fact that the Welsh Government has been at the forefront of foundational economy thinking, as highlighted in a Welsh Parliament Economy, Trade and Rural Affairs Committee report on the Foundational Economy published in April 2025, and a Mission Statement from the Welsh Government emphasising the role of the foundational economy in improving household liveability and building economic and social resilience through local supply chains, so tackling nature and climate emergencies.
The Foundational Economy: key features
The Foundational Economy comprises goods, activities and services which are essential components for everyday life. It can be divided into three domains:
- Material: including utilities, networks, banking and food, so connecting people to everyday essentials.
- Providential: providing universal services including education, health, care and public welfare.
- Overlooked : including goods and services culturally defined as essential and requiring occasional purchase, including hairdressing, house maintenance and recreation activities.
Together sectors in each of these domains account for around three-quarters of employment in Wales. Yet pay levels in the material and overlooked domains are low by comparison to jobs in sectors outside the foundational economy. Part-time jobs are also more prevalent. Hence there are concerns about poor job quality in parts of the Foundational Economy.
Innovation in the Foundational Economy
The Welsh Government has invested in innovative approaches to the development of the Foundational Economy, including through the £4.5 million Foundational Economy Challenge Fund announced in 2019 which sought to support the incremental growth of, and learning about, development in the Foundational Economy. Growing the ‘missing middle’ in the firm size distribution and spreading and scaling best practice were key objectives.
The Foundational Economy Challenge Fund supported 47 projects across Wales. They ranged in focus from using community assets as work spaces/ hubs, developing the visitor economy, start-up and small business support, embedding circular economy practices, and experimentation with alternative ownership models. Issues addressed included social housing maintenance and improving care quality through community support initiatives and trialling new technologies. Several projects included employment support and skills provision elements, including through apprenticeships. Some had an emphasis on enhancing capability to connect with, and compete for, local procurement opportunities. This underscores the fact that procurement is the main policy lever for Foundational Economy development in Wales.
A strong collaborative culture at grassroots level emanating from the Foundational Economy Challenge Fund has generated ongoing activity in terms of sharing practice examples of approaches adopted and what works in different local contexts in Wales. The current Welsh Government Foundational Economy Community of Practice is facilitated by Cynnal Cymru.
Policy Implications and Conclusions
The Foundational Economy has informed the Welsh Government’s thinking around how to do economic development. However, there are overlaps with other approaches, including Community Wealth Building, which also has a strong emphasis on procurement as a lever for social benefit, and building a Wellbeing Economy.
There is little evidence to date of significant engagement or progress with job quality as part of Foundational Economy discussions. This presents a missed opportunity to develop practical learning on mechanisms to address poor job quality alongside a focus on employment growth. It may be indicative of a tendency for policymakers to select aspects of economic development approaches which are politically and practically easier to operationalise than those implying more radical changes to economic systems, employment relations and patterns of ownership. Hence it remains important for grounded and bottom-up projects, practices and community-led developments to continue to advance Foundational Economy thinking at a community scale and feed into discussions at larger geographical scales.
At a time when there is an emphasis in the Industrial Strategy on backing eight sectors (the IS-8) with the highest growth potential, and the frontier industries at their leading edge, it is noteworthy that in supporting regional resilience a positive case can be made for integrating concerns with the Foundational Economy alongside other sectors, rather than treating internationally tradeable sectors as an independent entity.
This blog was written by Anne Green, Professor of Regional Economic Development and Co-Director, City-REDI, University of Birmingham.
Disclaimer:
The views expressed in this analysis post are those of the authors and not necessarily those of City-REDI or the University of Birmingham.