Labour Shortages, Supply Chain Top 2022 Concerns For Entrepreneurs
FREDERICTON — Business owners in Atlantic Canada are keeping an optimistic outlook, despite worry over ongoing labour shortages and supply chain disruptions heading into 2022.
That’s according to quarterly feedback from 1,000 owners of small and medium-sized enterprises (SME’s) from across Canada who responded to The Business Development Bank of Canada’s, (BDC) Entrepreneur 2022 Investment Outlook.
BDC measured two areas of planned investment: tangible assets (like machinery, equipment, materials, and buildings where production takes place) and Intangible assets such as software, intellectual property, research and development, marketing, and training.
With labour and supply listed as chief national concerns, there’s still reason for optimism, according to BDC vice president of research and chief economist, Pierre Cléroux.
“The results indicate entrepreneur confidence in the economy is strong and that investment intentions are above their pre-crisis level, with one-out-of-five SMEs planning to increase their investments in 2022,” Cléroux says.
BDC’s survey also revealed sales outlooks for the next 12 months are at an all-time high, despite concerns over labour shortages and supply chain issues.
While investment intentions gained momentum in its report, it’s worth noting that the bulk of the respondents weighed in before the latest surge of the Covid-19 Omicron variant and as the economy had almost fully reopened this fall.
Factors Limiting Investment To Watch In 2022
While economic uncertainty continues to hold back investments for a third of the businesses surveyed, BDC notes its importance has been declining with the reopening of the economy and the success of the vaccination campaigns in all provinces.
The survey shows that, for the first time since March 2020, labour shortages are starting to hold back investments for a growing proportion of business leaders. It also shows businesses will find it increasingly difficult to fill positions in 2022 as a result of an aging population and of lower immigration due to Covid-19, with the Atlantic provinces expected to suffer the most from labour shortages.
While low demand and low cash flow remain greater barriers to investments than labour shortages, the situation is expected to change as labour shortages worsen while cash flow and demand improve.
Over half of those surveyed already had difficulty in hiring qualified workers, the highest proportion since BDC began tracking it as part of its Small Business Investment Outlook Survey in 2019.
Supply chain disruptions will keep affecting businesses in 2022, as demand remains high and product stocks low.
BDC’s forecast shows It will take months for manufacturers to clear backlogged orders accumulated during the crisis and for maritime transport to get back to normal.
The complexity of global supply chains and their dependence on a few ports has led to significant bottlenecks, with BDC adding capacity pressure is expected to be particularly high in the first half of 2022.
While supply chain disruptions are still not being seen as a long-term problem, those effects will continue to be felt globally into the New Year, but BDC noted they should largely be resolved before the end of 2022.
Investment Outlook Remains Positive Despite Inflation Fears
Among the Economic Regions surveyed by BDC, Investment intentions for 2022 are highest in Atlantic Canada, with the region seeing a lift from high energy prices and the full reopening of Nova Scotia on October 4, (before Omicron).
Investment intentions were at an all-time high in the Atlantic provinces, where 92 percent still plan to maintain or increase their investment level in 2022.
Across Canada, with increased global demand for energy pushing up oil prices, BDC projects higher energy prices will help spur investments in 2022, while noting that uncertainty remains high for the energy sector in the long term.
Additional Highlights:
• 84 percent of businesses are planning to invest more or the same in the next 12 months. (An increase of 8 points since December 2020) (92 percent in Atlantic Canada, up 12 points)
• 74 percent of businesses expect Canadian economic conditions will improve or remain the same. (An increase of 12 points since December 2020) (79 percent in Atlantic Canada, up 20 points)
• 87 percent of businesses expect to hire or keep the same number of employees. (An increase of 10 points since December 2020) (86 percent in Atlantic Canada, up 2 points)
• 55 percent of businesses are experiencing difficulties hiring qualified workers. (An increase of 1 point since December 2020) (63 percent in Atlantic Canada, up 6 points)
• 83 percent of businesses expect their sales will increase or remain the same. (An increase of 13 points since December 2020) (79 percent in Atlantic Canada, up 4 points)
Tyler Mclean is a Huddle reporter based in Fredericton. Send him your feedback and story ideas: [email protected].