Economic Uncertainty Holding Back Canadian Manufacturers

KPMG LLP

KPMG report reveals Canada's slower and more cautious approach to global growth

TORONTO, Sept. 29, 2016 /CNW/ - According to KPMG's Canadian Manufacturing Outlook 2016 released today, Canada's manufacturing sector has the skills, confidence, and tools for growth, but there is concern around economic risks and volatility of foreign exchange rates.  There is also a strong need for increased innovation, collaboration, and a greater appetite for opportunities beyond the United States in order to stay competitive globally.

This year's report reveals that Canadian manufacturers are ready to make their move, with over half (57 per cent) indicating they have made exploiting opportunities for growth a top strategic priority. In contrast, global manufacturers are eyeing a more aggressive approach to growth within new markets and sectors, stronger plays for innovation and exhibit higher tolerance for risks than Canadians, according to KPMG's Global Manufacturing Outlook 2016. In fact, nearly three-quarters of global manufacturers indicated growth is a high priority over the next two years.

While it's clear that Canadian manufacturers are targeting growth, they will need to increase the pace in R&D, innovation, and speed to market in order to compete globally. This is evident throughout the findings of KPMG in Canada's Canadian Manufacturing Outlook 2016:

• Economic uncertainty is holding us back - Nearly half of Canadian manufacturers see economic growth, currency fluctuations, and pricing pressures as the top external factors that will impact their growth over the next three years. Meanwhile, an economic downturn, new entrants or technologies, and the volatility of foreign exchange rates top the list of perceived business risks.
  
  
• Canadians are still cautious - Although Canadian manufacturers are forecasting moderate growth for their companies and industries, their confidence in the Canadian and global economy is lacking. These attitudes are the cause of Canadians' relatively low levels of investment in innovation and R&D, and new market strategies – putting them at a disadvantage when it comes to competing against other countries.
  
  
• Growth is a top priority - Growth is a core focus over the next two years for half of the survey respondents. Two-thirds say they will push for increased market share in their existing geographical markets and sectors, while a little over half will enter new geographic markets (albeit, primarily the US). Once again, this speaks to a cautious approach, but one that shows at least somewhat of a desire to step outside Canada's borders.
  
  
• Investments in R&D rise but slow in technology – Compared to previous years, Canadian manufacturers are more willing to invest in research and development (R&D). Nearly a third have already spent between 2-3 per cent of revenue on R&D over the last few years. While these R&D investments are lower than their global counterparts, who have spent 4-5 per cent of revenue, it indicates an increased desire to pursue innovation and explore new products and services. However, whether due to economic concerns or overall risk aversion, a little over half of respondents are looking to invest in new technologies. Of those, the prime areas of focus are investments in advanced IT systems, robotics, and advanced materials.

QUOTES
"Canada is known for its risk adverse nature, economic reservations and preference for staying close to home. Now, however, to be apprehensive about new markets, investing in R&D, and embracing supply chain efficiencies is to leave markets and sectors open for the taking."

-   Bob Jolicoeur, National Industry Leader, Industrial Markets, and National Sector Leader, Chemicals, KPMG in Canada

"Our 2016 Canadian Manufacturing Outlook survey results show the need to push forward, move beyond traditions, and keep pace with the world."

-   Don Matthew, National Sector Leader, Industrial Manufacturing, KPMG in Canada

LEARN MORE
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KPMG – Industrial Markets
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@KPMG_Canada – #CMO2016
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About KPMG's Canadian Manufacturing Outlook
KPMG's Canadian Manufacturing Outlook 2016 is the largest report to date, incorporating survey responses from 223 Canadian manufacturing executives. Among them are insights from company CFOs, treasurers, and controllers, who comprise 37 per cent of respondents; as well as manufacturing CEOs and president (35 per cent), and other industry executives (28 per cent) – a majority of which define their main role as being connected to either the financial or general management side of their operations. This year's outlook also captures perspectives from companies throughout the country, two-thirds reporting annual revenues of less than $50 million.

About KPMG
KPMG LLP, an Audit, Tax and Advisory firm (kpmg.ca) and a Canadian limited liability partnership established under the laws of Ontario, is the Canadian member firm of KPMG International Cooperative ("KPMG International"). KPMG member firms around the world have 174,000 professionals, in 155 countries.

The independent member firms of the KPMG network are affiliated with KPMG International, a Swiss entity. Each KPMG firm is a legally distinct and separate entity, and describes itself as such.

SOURCE KPMG LLP

Image with caption: "Canadian Manufacturing Outlook 2016 (CNW Group/KPMG LLP)". Image available at: http://photos.newswire.ca/images/download/20160929_C7995_PHOTO_EN_783977.jpg

Andrée Gage, National Manager, Communications, KPMG in Canada, 416.777.3448, [email protected]