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RCPsych Wales - Louis Mertens, The Foundational Economy and Mental Health

Historically, the Welsh Government have put a significant emphasis on evidence-based policy (EBP) which has put the focus for addressing mental illness onto treatment and mental health services. EBP has always been about accountability, and it is relatively easy to prove the cost-value of mental health services, medicines and therapies.

However, with the Welsh Government's plans to shift its focus onto investment into the foundational economy, there is an opportunity to address some of the deep-rooted issues for mental health in Wales that don’t typically factor in Government mental health strategies: financial stress, environmental stress and working conditions.

Both the World Health Organisations’ Health Equity Status Report Initiative (2018) and commissioning guidance issued by the Centre for Sustainable Health Care and the Joint Commissioning Panel for Mental Health (2015) recognise the value of appropriate housing to population mental health, access to which is heavily influenced by socio-economic status. It should be a key tenet of any government focused on designing a sustainable mental health plan that they shouldn’t just improve the treatment of mental health issues, but they should attempt to prevent them.

There have been some attempts in Wales to focus on prudent healthcare and preventative measures, but we are still not quite at the level where we can think about preventing poor mental health through whole policy programmes. A Wales wellbeing budget, of the same ilk as that put forward in New Zealand would be a good start. To means test every policy by the mental health impact would be desirable, but before we go redesigning the entire process of government in Wales, perhaps first we should look at how we can explore the potential of existing projects of work such as the foundational economy. The impact this might have on population mental health could set a precedent for how Wales thinks about mental health, and how we design our society around well being.

Some context

The foundational economy was an economic model that was developed in response to the financial crisis of 2008. At that time Preston in Lancashire, like many other cities and towns across the UK, was hit hard. In 2011, seven-hundred million pounds was meant to be invested by a large national retail brand to redevelop a large portion of Preston’s city centre. But this funding was withdrawn, and the redevelopment abandoned.

At this time, these big businesses defined the economy. Councils relied on them to bring investment into town-centres. Their size and plurality of job offerings could make towns, but equally their lack of solid roots meant they could just as easily break them. Ford Bridgend plant in South Wales is one of these businesses.  The approach of successive UK governments has been to work with these large employers under the illusion that these employers and their jobs will hang around. However, many are now threatening to leave, Ford Bridgend included, and all local politicians can offer them to stay put is nostalgia.

In 2013, it was recognised in Preston (Cllr Brown, 2019) and it is being recognised in Wales now: The true anchors of the economy are SMEs and anchor institutions supplying foundational goods and services like utilities, housing, food, healthcare and education. Many of these institutions largely spend from the public purse through single large contracts. A local high school, for example, might have a catering contract to offer worth £2 million that smaller local businesses wouldn’t have the capacity to be able to fulfil. Consequently, that money slips through the fingers of local businesses and into the pockets of big business that may operate UK wide and with very little stake in the local economy.

However, through the foundational economy model which has been successfully piloted by Preston City Council and is being championed here in Wales by Lee Waters AM, Deputy Minister for Economy and Transport, you can keep wealth within the local economy (Cllr Brown, 2019). Instead of having anchor institutions offer the whole contract to a single large business, you can split these contracts into more manageable sizes for local businesses. The high school then becomes a much greater source of income for local businesses, and a greater anchor for the community. The greengrocers who supply them, buying from their local farmers market, can employ more local people. Businesses in the local economy have a chance to grow and aren’t tempted to uproot like some of the larger businesses because their trade relies so heavily on local anchor institutions.

You may have gotten this far and be rightly wondering at what point does this allow us to tackle poor mental health? To that, there are as many as three answers.

Financial stress

The first relates back to preventative measures. In Wales, there are many levers of policy that affect our day to day lives that are not fully devolved. Zero hours contracts and the minimum rate of pay for example, cannot be banned or altered by Welsh Government. However, these things make a significant difference to social quality (Tomlinson et al, 2016), the stresses we face, our financial security or insecurity and in-work poverty.

In Wales, the prevalence of common mental health disorders can be linked to socioeconomic and income deprivation (Fone et al, 2013). Research suggests that people who perceive themselves to have a lower socio-economic status than those around them are disproportionately affected by mental health issues (Skapinakis et al, 2006; Wetherall et al, 2019).  As the price of living continues to rise against wages then the impact of financial stress on population mental health should become more and more relevant, not least because in a survey of workers, Welsh workers were more likely to describe symptoms of stress, loss of sleep and fatigue as a result of their financial situation (BITC, 2018). Access to the lifeline of benefits (Galloway et al, pp. 204, 2018) for people with mental health disorders or access to paid employment, can be central to recovery and human psychological health. These opportunities depend on the local labour market (O’Flynn, 2001) and the local economy.

This is what the foundational economy model has an intimate hold over. Although the levers to be rid of zero hours contracts and to introduce the real living wage do not exist as primary legislative powers in Wales, they can be introduced in part through the foundational economy. Welsh Government could insist that all local businesses and employers who want to take on public contracts offer their employees the option of a permanent contract with fixed hours and pay their employees the real living wage. They can set the bar for others, too.

Mike Hedges, AM for Swansea East, suggests this should go further. Not only should it be a pre-condition for contracting with public sector bodies via the Welsh Government, but it should also be a pre-condition for awarding Welsh Government grants and loans to private companies (Member Debate: Tackling Poverty, 2019). This of course is not a panacea, but there is the potential to mitigate some of factors contributing to mental illness through a fair wage and reliable contracts.

Environmental stress

The second answer to the impact of the foundational economy on mental health stems from something called the environment stress hypothesis. Simply put, this is the hypothesis that the quality of the environment we operate in is linked to the amount of stress we experience. This in turn has its own impacts upon population mental health.

Internationally or nationally mobile businesses might exist largely in industrial estates and out-of-town retail centres. Sometimes they might offer rejuvenation into highstreets if they bring in investment through flagship store redevelopments but as Preston shows, it isn’t a reliable way to seek investment. The picture across the UK would suggest that it doesn’t happen too often.

In contrast, local SMEs (small-medium sized enterprises) and institutions have a greater stake and a bigger role to play in developing the landscape of our towns and living spaces. Foundational SMEs have struggled since the economic crash and so has the aesthetic of our high street. It is not uncommon to walk up a high-street in the South Wales Valleys and see empty shop fronts and abandoned retail units. There are similar pictures all the way through the UK.

A healthy work life is good for our mental health, but so is living in a high quality, green neighbourhood. The image of a struggling high street is distinctly the furthest thing from a high-quality neighbourhood, and that might reflect in the mental health of the local population too. Studies of Dutch cohorts and their neighbourhoods (Dalgard and Tambs, pp. 530-536, 1997; Generall et al, 2019) and studies of depression in older populations in neighbourhoods with varying green coverage (Perrino et al, pp. 476-480, 2019) both draw similar conclusions. If you live in a good quality neighbourhood you are less likely to suffer from poor mental health.

It is not such a big stretch, therefore, to imagine that investment into foundational SMEs, which decorate our local highstreets might also provide for the local population a more positive, higher quality neighbourhood too. Not least because local businesses often have one foot in the local charity sector, or have an eye on a charitable partnership. In this way, the foundational economy might provide mental health benefits not only for the local workforce through gainful employment, but to some extent, all residents.  

Work-place stress

A third answer to how the foundational economy can benefit population mental health is more direct but still feasibly significant. There is no reason why the influence of the foundational economy over mental health should be limited to the residual benefits of contracts, pay and encouraging high quality neighbourhoods. In addition, the Welsh Government could insist that all these employers taking business from public contracts sign up to a mental well being in work scheme.

The statistics for how mental health is approached in the workplace are frightening. In 2018, The Business in the Community Mental Health at Work Wales Spotlight pointed out that 61% of employees have experienced mental health issues because of work, only 18% feel able to disclose a mental health issue to their line manager and just 30% of line managers had received any training in mental health.

The response of employers to their employee’s mental health is generally poor, and incredibly overlooked as a factor by government. These statistics certainly justify such a scheme, co-designed by employees and mental health professionals, that guarantee employees certain liberties that are beneficial to their mental health. Employers and line managers could be asked to undertake mental health first aid training and stress risk assessments. Employees could be offered e-learning opportunities to make them more aware of their own mental well being.

Obligations could be scalable to the size of the contract that companies are taking on, so as not to over burden smaller businesses, but similarly, resources should be offered which tackle the unique challenges of mental health in small businesses.

Concluding thoughts

Perhaps it is an abstract idea for now that needs more development, but the issues that contribute to mental health are broad and societal and we can’t shy away from addressing them.

The foundational economy has the potential to, not resolve in all entirety, but at least address some of these issues as a piece in a much larger Wales-wide puzzle. There is the potential here to guarantee some financial security, to relieve environmental stress, and to introduce a duty on employers benefiting from public procurement to promote the mental well being of their employees.

But from all this comes a lesson, that in order for the investment into the foundational economy pilots to reach their full potential, the Welsh Government need to ensure that they don’t repeat the mistakes of the past. GDP must not be relied upon as an effective tool to measure society. Welsh Government must not consider the foundational economy’s contribution to existing measures of economic growth as the only indicator of success when this project has the potential to bring about so much more.

If we are to think about mental health in a truly preventative way, we need to consider the impact that projects of work like the foundational economy pilots have on communities, and use these to justify preventative measures for mental health in other areas.

If you have any more thoughts on preventative mental health policies, sustainable psychiatry or the environmental stress hypothesis please get in touch at:


Business in the Community. 2018. Mental Health at Work. Available at:

Cllr Brown, M. in: Access to Banking and the Foundational Economy: Preston City Council. 2019. Economy, Infrastructure and Skills Committee. Available Here:

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Galloway, A., Boland, B., Williams, G. 2018. Mental Health Problems, Benefits and Tackling Discrimination. BJPsych Bulletin 42. Pp. 200-205. Doi: 10.1192/bjb.2018.43

Generaal, E., et al. 2019. Neighbourhood characteristics and prevalence and severity of depression: pooled analysis of eight Dutch cohort studies. British Journal of Psychiatry 215(2) pp. 468-475. Doi: 10.1192/bjp.2019.100

Hedges, M. 2019. In: Member Debate: Tackling Poverty. National Assembly for Wales. Available at:

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Perrino, T. et al. 2019. Neighbourhood greenness and depression among older adults. British Journal of Psychiatry 215(2) pp. 476-480. doi:10.1192/bjp.2019.129

Skapinakis, P. et al. 2006. Socio-economic position and common mental disorders. Longitudinal study in the general population in the UK. British Journal of Psychiatry 189. Pp. 109. Available at:

Tomlinson, M., Walker, A., Foster, L. 2016. Social Quality and Work: What Impact Does Low Pay Have on Social Quality? Journal of Social Policy 45(2) pp. 35-371. Doi: 10.1017/S0047279415000732

Wetherall, K., Robb, K., O’Connor, R. 2019. Social rank theory of depression: A systematic review of self-perceptions of social rank and their relationship with depressive symptoms and suicide risk. Journal of Affective Disorders 246. Pp. 300-319. Doi: 10.1016/j.jad.2018.12.045

WHO European Office for Investment in Health and Development Italy. 2018. Health Equity Status Report Initiative. 

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RCPsych Wales