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Business owners will keep investing in 2020 despite economic uncertainty: BDC study

Many Canadian entrepreneurs will continue investing in their companies in 2020 despite growing uncertainty about world economies, according to BDC’s annual survey of Canada’s entrepreneurs’ investment intentions.

The study finds Canadian entrepreneurs in the manufacturing and services sectors expect to see their businesses’ sales grow and they intend to hire workers to meet a sustained demand for their products and services. Investment intentions are also rising among exporters but are sluggish for businesses focused on selling to the domestic market.

According to Pierre Cléroux, BDC’s vice-president, research and chief economist, “Canadian entrepreneurs will keep investing in their companies despite international uncertainty and lower global growth. There’s reason to be optimistic — at the end of 2019, the United States, Mexico and Canada signed a new free trade agreement, reinstating favorable conditions for Canadian products and services.”

Canadian business owners plan to increase their investments in technology, marketing initiatives, intellectual property and employee training. This is in line with a shift toward a services economy and the digitization of businesses. However, investments in tangible assets such as real estate, machinery and equipment will decline, a trend BDC identified in previous studies.

Other key findings:

• Investment intentions are highest in Ontario and Quebec where manufacturing, technology and services are the strongest sectors.
• Investment intentions are declining in British Columbia where spending intentions on machinery and equipment have significantly decreased.
• Business owners are the most pessimistic in the Prairies, mostly because of low commodity prices and limited cash flow.
• Labour shortages are of concern in some areas, notably Quebec, where they are the top factor limiting investment.

BDC conducted this investment outlook survey among 1,000 owners of small and medium-sized enterprises in Canada during fall 2019. The objective was to gauge their level of confidence in the economy, their business outlook, as well as their investment plans for the next 12 months.