Higher-than-expected economic growth in 2017 will fuel Canadian business confidence in 2018, leading to a jump in planned investments by small and mid-sized enterprises (SMEs), according to a survey by the Business Development Bank of Canada (BDC).
SMEs plan to make $140.5 billion in investments this year, a three per cent increase over 2017, mainly to support their growth, found the survey of 4,019 business owners.
The upswing is due largely to a surge in business acquisition plans, a long-expected trend driven by Canada's aging population and the retirement of baby boomer entrepreneurs, said BDC.
Business owners expect to spend 79 per cent more on acquiring other businesses in 2018, or $18.9 billion, up from $10.6 billion in 2017.
"The findings are very encouraging because SME investment is critical to Canada's economic health," said Pierre Cléroux, vice-president of research and chief economist at BDC. "These businesses make up 99.7 per cent of all Canadian companies. When they invest, they become more productive and competitive and can offer higher wages and benefits."
By region, British Columbia and the territories (17 per cent planned investment increase), Alberta (up 12 per cent) and Quebec (up 11 per cent) have the brightest investment outlooks, while Ontario businesses expect to trim investments by one per cent in 2018 and other regions anticipate steeper drops.
The BDC study also found:
- A lack of qualified personnel is the leading obstacle to making investments, with chronic labour shortages especially pronounced in rural Quebec and Nova Scotia, found the survey.
- Spending on research and development and employee training will rise by a total of $2.4 billion this year, reflecting a long-term shift in the way Canadian businesses invest, said BDC.
- Among sectors, technology (up eight per cent) and services (up seven per cent) show the highest growth in investment intentions, while manufacturing is flat and a decline is expected in the construction and resources sector (down 14 per cent).
- Nearly half of mid-sized businesses (those with 100 to 499 employees) plan to invest to increase automation in operations, while only a quarter of businesses with less than 100 workers plan to do so.
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