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MARK VAUGHAN-JACKSON: Newfoundland and Labrador bucking the trend on business investment confidence

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New BDC survey shows 36 per cent of entrepreneurs in N.L. plan to increase investments in their own companies in 2019

The Business Development Bank of Canada (BDC) just finished surveying thousands of small- and medium-sized businesses on their investment plans for the coming year.

And things don’t look that great for Atlantic Canada as a whole.

Newfoundland and Labrador, however, is another matter entirely.

BDC’s results show that 36 per cent of entrepreneurs in this province plan to increase investments in their companies in 2019.

That’s in stark contrast to the 34 per cent of Nova Scotian entrepreneurs who plan to decrease their investments. The numbers are also low in P.E.I. and New Brunswick, where a 32 per cent decrease is forecast.

Across the rest of the country, results are mixed: B.C., Manitoba and Alberta all plan single-digit increases, but Atlantic Canada, Quebec, Saskatchewan and Ontario plan single-digit decreases.

The high confidence in Newfoundland and Labrador can trace its roots to the economic turnaround that’s gathering steam, according to Pierre Cléroux, BDC’s chief economist.

“I think (in) 2019, the economy is going to perform better, not only from last year but also perform better than the other Atlantic provinces,” Cléroux said.

While a strengthening oil sector is good economic news generally, it is also encouraging more entrepreneurs to invest in their companies, which is conducive to growth in non-oil related sectors.

There’s a reason why “diversify, diversify, diversify” is a familiar mantra for any resource-based economy.

“Definitely it would be a good idea to continue to work on diversification, because the problem with commodities — and oil is the obvious one — is there are a lot of cycles, and prices are moving up and down, and this really has an impact on the sector, especially on investment,” Cléroux said.

“Actually, I think what we should do is when times are improving we should even work harder on diversification, because we have a little bit more resources, the government has more revenues, so it’s actually a good time to do that. We often, in general, do the opposite.

“We don’t think about diversification when things are going well and when it’s slowing down, well, it’s too late.”

Pierre Cléroux, chief economist with the Business Development Bank of Canada.
Pierre Cléroux, chief economist with the Business Development Bank of Canada.

"The level of business confidence in terms of their own businesses is as high as last year, which is a good message for businesses. They’re a little less confident about the economy, which is not surprising, but they still believe that we are in a good business environment, and that’s a key.”

But while the news is good for Newfoundland and Labrador, Cléroux noted that the report highlights some serious challenges for the country, including a shrinking labour force.

“One of the big trends and challenges is our aging population. We’ve been talking about this for a long time but it’s really hitting us now. More and more Canadians are retiring, and this is a more acute problem in some provinces, including Newfoundland and Labrador, New Brunswick, Nova Scotia and Quebec,” Cléroux said. “So, the labour force is not increasing, which is making it difficult for companies to recruit. This is one of the challenges we’re going to have as a country for the next decade. … This is limiting the ability of business to grow and it’s limiting the investment intentions.”

That’s data businesses and governments should pay attention to, he said.

“So that’s very important to understand, that every provincial (government) and the federal government should really take this issue very seriously because it’s actually slowing down the economy,” Cléroux said.

Another trend the survey tracked was where companies are putting their investments within their own companies.

“The trend that we have seen over the last few years, and we can see that it’s accelerating: 43 per cent of all Canadian (small and medium) firms are going to invest in new technology this year. That’s phenomenal,” Cléroux said.

“… if you want to remain competitive this is a big signal.”

Given the turmoil of recent months — from trade disputes to the spectre of increasing interest rates — Cléroux said the report also carries an important overall message.

“It’s a message that despite all the uncertainty, despite the fact that interest rates are increasing, the business confidence is still quite strong,” he said. “The level of business confidence in terms of their own businesses is as high as last year, which is a good message for businesses. They’re a little less confident about the economy, which is not surprising, but they still believe that we are in a good business environment, and that’s a key.”

After watching the impacts of the last economic down-twitch and its ripple effects across Newfoundland and Labrador, I take some comfort in the news that small- and mid-sized businesses here are more confident than in other parts of the country.

Mark Vaughan-Jackson is The Telegram’s business editor.  He can be reached at mark.vaughan-jackson@thetelegram.com

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