Investment plans of small and medium-sized businesses are stable amid economic uncertainty, focus on growth and productivity.
- 76% of Canadian entrepreneurs plan to invest a total of $111 billion in their businesses in 2016, an amount similar to what was invested in 2015.
- British Columbia and the Territories show the greatest increase in investment intentions (14%), followed by Ontario (2%). Albertan entrepreneurs indicated they intend to invest 27% less than in 2015. The situation remains stable in the other parts of Canada.
- A minority of enterprises (10%) account for three-quarters of planned investments.
- The main factor limiting investment is a lack of confidence in the economy (48%).
MONTREAL, Jan. 28, 2016 /CNW/ - Despite a challenging economy, nearly three in four Canadian small and mid-sized enterprises (SMEs) intend to invest in developing their business in 2016, a new study by the Business Development Bank of Canada (BDC) has found. Top reasons cited for investing were to fund growth plans (77% of respondents) and to boost productivity or efficiency (75% of respondents). The study also confirms that investing in your business is crucial to improving competitiveness.
"While Canadian entrepreneurs are wary about the state of the economy, they appear generally optimistic about the future of their business," said Pierre Cléroux, Chief Economist and Vice President, Research at BDC. "It is encouraging to see small businesses remain focused on growth and productivity in spite of a challenging economy."
This is the first study of its kind in Canada designed to show what executives of small and medium-sized businesses are planning for investment projects, in terms of both the sums of money they plan to allocate, and the motivations and constraints that are holding them back from investing. The survey of 4,000 entrepreneurs from August to November found several regional bright spots. In British Columbia and the Territories, entrepreneurs plan to invest 14% more than in 2015, while Ontario businesses plan a 2% investment increase.
Struck hard by the slump in the crude oil market, Alberta SMEs are expected to invest 27% less this year. The study also found shoots of optimism in the province, since entrepreneurs there intend to invest $65,000 each in their business, over 50% more than the Canadian median and by far the largest median amount of planned investment when compared to other regions. Additional regional details are available in the BDC survey report.
"There is every indication that the future belongs to entrepreneurs who invest in their businesses. These SMEs have better growth prospects, a larger number of employees and the best chance to succeed in international markets," adds Mr. Cléroux. "We strongly encourage SMEs to step up their investments in the coming months. Also, with the cost of borrowing at an all-time low, the time is ripe."
Other findings from the survey:
- In terms of value, the largest planned investments were earmarked for commercial real estate projects, with a total of $63 billion allocated for 2016, a 5% increase from last year.
- Other common investment projects include computer hardware and software purchases as well as website and e-commerce development. The fastest-growing companies are most likely to be planning information technology investments.
- Three quarters of planned investments come from just 10% of firms. These companies are more likely to export and invest abroad. They have also existed for over 35 years on average and have 20 or more employees.
BDC is the only bank dedicated exclusively to entrepreneurs. With more than 100 business centres and over 32,000 clients across Canada, it offers loans, investments and advisory services. BDC's purpose is to support Canadian entrepreneurship with a focus on small and medium-sized businesses. To learn more, visit www.bdc.ca.
SOURCE Business Development Bank of Canada
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