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January 16, 2017

Increasingly confident Canadian businesses boost investment plans for 2017

70 per cent of entrepreneurs expect increased sales, up from 45 per cent last year

MONTREAL -- Canadian entrepreneurs have more confidence in the economy and plan to boost business investment to $96.6 billion in 2017, according to a new study from the Business Development Bank of Canada (BDC). Investments are up 1.6 per cent from the totals invested in 2016.

Seventy percent of the entrepreneurs surveyed expect increased business revenue in 2017, a significant jump from the 45 per cent who had the same expectation last year. Technology businesses, manufacturers and goods exporters report the strongest growth in investing intentions.

"This survey confirms the optimism we're hearing from our business clients every day," says Pierre Cléroux, BDC's Vice President, Research, and Chief Economist. "Entrepreneurs are increasingly confident in the economy, with exporters leading the way in terms of investment intentions. Canadian businesses are ready to invest and they have growth on their minds."

The survey of 3,988 executives at small and mid-sized enterprises (SMEs) conducted last August and September found renewed optimism coast to coast, with all provinces and territories showing higher expectations of sales growth than last year.

Reflecting the stabilization of crude oil prices, Alberta SMEs lead with a 17.1 per cent jump in planned investments in 2017 versus 2016. Ontario foresees a 2.9 per cent rise in investment intentions, Quebec expects a 0.6 per cent increase, while Atlantic Canada maintains investment at the same level as 2016. British Columbia and the territories anticipate a 5.4 per cent decline in investment intentions and the Prairies forecast a 17.5 per cent drop.

Nation-wide, top investing priorities are growth and productivity projects, led by IT, training, machinery, equipment and vehicles.

"Our research also confirms technology is playing an increasingly important part in our economy. Greater investment will help Canadian companies get more productive and that's key for staying competitive in the current business environment," Cléroux says, noting that BDC recently launched a free online productivity benchmarking tool available at bdc.ca.

Additional regional details are available in the BDC study, which also found:

Technology firms show the most optimism, with an average of $410,000 in planned investments in 2017, up 41 per cent from the amount they invested in 2016. The manufacturing sector came second, with an average of $340,000 in investment intentions, up 17 per cent over last year.

Top-cited obstacles to investment are lack of cash flow and lack of qualified personnel. Lack of confidence in the economy is no longer a top barrier to investment. Two thirds of businesses intend to finance investments mainly with working capital or other internal funds, while less than one in four plan to use a loan or line of credit, despite favourable credit conditions.

Businesses that invest more tend to project higher income growth. Those projecting 20 per cent or higher growth plan to invest $380,000 on average in 2017. Even companies expecting zero or negative growth aim to invest an average of $150,000.


 

 

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