Atlantic Canada’s Entrepreneurs Are Slowly Regaining Confidence In Economy
MONTREAL – A quarterly survey commissioned by the Business Development Bank of Canada found that investment intentions improved the most in Atlantic Canada and Quebec for the first quarter of 2021, as entrepreneurs slowly regain confidence in the economy.
Investment intentions in Atlantic Canada is at +1, while in Quebec, it’s +4. Ontario, B.C. and northern Canada, and the Prairies are all in the negatives, with the Prairies at the lowest with -13. Nationwide, net intentions have improved but remain in the negative, according to BDC’s Outlook on Canadian Entrepreneurs’ Investment Intentions.
The entrepreneurs are most likely to invest in intangible assets (53 percent), including software, marketing or employee training. In Atlantic Canada, business owners plan to invest in improving sales and marketing.
These results of the survey are presented as a balance of opinion, which is the difference between the number of businesses that have positive and negative opinions. Those with neutral positions were excluded.
BDC’s VP of research and chief economist Pierre Cléroux says the Atlantic region is “performing better” than many other regions because “the number of cases, and the number of restrictions on the economy is much lower than other parts of the country.”
In Quebec, it was the quick rebound prior to the second wave that gave entrepreneurs confidence, he added.
Overall, the rollout of the vaccine is making business owners much more optimistic this year – “the fact that most Canadians should be vaccinated by the end of the summer, and a number of restrictions will go away,” he said.
Additionally, BDC’s data shows many businesses are doing better now than the beginning of the pandemic, as their sales increase and so does their cash flow. “The majority of entrepreneurs” surveyed said cash flow for the coming month is not an issue, a significant improvement.
For the first time since the beginning of the recession last spring, more entrepreneurs (38 percent) also expect sales to increase than decrease (25 percent) in the next year.
Some sectors of the economy, including the food processing and lumber in Atlantic Canada, and manufacturing in Canada overall, have been doing well, with some back to pre-pandemic levels.
While wholesalers and tech companies are showing weaker investment intentions for the coming year, those in the resources sector are showing strong recovery, the report said. As the resources sector see commodity prices recover though, it’ll face significant capacity and productivity challenges.
The quarterly survey was conducted by global research firm Delvinia. It polled 1,001 owners of small and mid-sized businesses from December 3 to 18 to look at their level of confidence in the economy, business and hiring outlooks, and investment plans over the next year. It found that a growing number of business owners plan to invest more in 2021 than last year.
Cléroux says the poll shows a marked improvement from three similar surveys done previously, and from last quarter, when more than half thought the economy would deteriorate in the few months that followed.
But Cléroux cautions that while these are the most positive results BDC has seen since the pandemic began, business spending will remain weak in the coming months. He says the survey “paints a picture of an economy that will be in a slow but sustained recovery.”
High indebtedness, weak demand, additional health restrictions and new mutations of the Covid-19 virus could dampen the optimism as well.
As the economy recovers, structural challenges that were there before the pandemic will start to come back, Cléroux said. In Atlantic Canada, those include labour shortages and capacity pressure, which means companies would have difficulties to respond to demand if it increases significantly in a short time.
BDC’s report shows 57 percent of Atlantic Canadian companies have a hard time with hiring, and 53 percent are facing difficulties with capacity pressure.
“The Atlantic provinces are close to the level of jobs they had in February. You’re at 98 percent, which is higher than the Canadian economy, so I think as the economy is improving businesses are rehiring people, and then the problem we had before, which is a shortage of workers, is coming back,” he said.
Lower levels of immigration, which is “a good source for new workers” for Canada and the Atlantic provinces specifically, will make the problem more dire. Programs like CERB might also keep people out of the job market longer, Cléroux said.
“A program that is helping Canadians who lost their job, but at the same time, it could keep Canadians away from the job market,” he said.
Cléroux says this recession is different from previous ones because it’s fueled by the pausing of some sectors in the economy. But the challenges will return when things get better.
“We expect in 2021 in most parts of the country, we’re going to have a shortage of labor, because we’re going back to the pre-crisis level, and with the good things, but also with the challenges we have.”
Inda Intiar is a reporter for Huddle. Send her story suggestions: [email protected]
