East Coast SME Optimism Rebounds
January 17th, 2017
The Business Development Bank of Canada is seeing growing optimism among Canada’s small- and medium-sized businesses, with particular strength in the national technology sector and across Atlantic Canada.
The BDC, the business-focused financial institution owned by the federal government, on Monday released its annual survey of 4,000 of those businesses and their intentions for the coming year.
The headline figure shows that these small businesses plan to boost total investment to $96.6 billion in 2017, up 1.6 per cent from 2016. What’s really interesting about the survey is that BDC found particular strength in the tech community nationally and in Atlantic Canada.
“What we’re seeing in the survey is that entrepreneurs in Atlantic Canada are more confident about the economy than a year ago,” said Pierre Cléroux, BDC’s vice-president of research and chief economist. “For example, 75 per cent of the entrepreneurs in Atlantic Canada believe that their revenues are going to increase this year. So this is a very positive result. And it’s actually higher than the national average.”
On a national level, 69 per cent of small business owners are expecting improved revenue in 2017 — an improvement from 45 per cent in the 2016 survey. Cléroux said the main reason for the increase is the strong optimism among high-growth small businesses, who are expecting a 19 per cent jump in revenues.
The survey found that retail businesses lag other sectors, with a drop of 31 per cent in the amount they intend to invest over the next year.
Overall, the survey showed that a lack of confidence in the economy is no longer a primary obstacle to investment. Rather, the biggest problems are the lack of cash flow and of qualified personnel.
Cléroux added that the information technology sector is showing particular strength right across the country, driven by both strong investment and high demand for technology products.
“The tech sector has been growing very strongly in the last five years,” said Cléroux. “In fact, it’s the only sector that has been outperforming the economy in terms of growth. That’s why I’m not surprised to see that their investment intentions are so good compared to the other sectors. Their investment intentions are 38-per-cent higher this year than the year before, which is the highest level in our survey.”
While they are expecting higher revenues, technology entrepreneurs in Canada are expecting to dramatically increase their investments in 2017.
BDC found that 54 per cent of the entrepreneurs in the tech sector plan to increase investment in 2017 — far higher than 34 per cent for small- and medium-sized businesses in the broader economy.
Cléroux said that the survey results also point to the underlying strength in demand for tech products because so many companies overall list technology at the top of the capital investment plans in the coming year.
“When we ask all the entrepreneurs in our survey, what is going to be your number-one investment project for 2017, 61 per cent said it’s going to be an investment in technology,” said Cléroux. “So they want to invest in computer hardware, in software and ecommerce. That’s the reason why we’re confident about the tech industry — it’s because the demand will remain very strong.”