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Oct 14, 2011

Better year ahead: 51 per cent of Canadian businesses believe 2012 will be better than 2011

TORONTO--Faced with global economic uncertainty, 51 per cent of Canadian businesses believe 2012 will be a better year than 2011, and only 13 per cent expect it to be worse.  More than one in three (79 per cent) of Canadian business  owners also plan to invest the same amount or more into their business in 2012, according to a new report from BMO Bank of Montreal.

Those who believe that 2012 will be a better year, cite a number of factors, top among them being business optimism (14 per cent), confidence in improved market environment (12 per cent), their restructured or improved business practices (11 per cent), the economy is getting better (10 per cent) and that they have expansion/business growth plans (8 per cent).

Businesses that are less optimistic about the year ahead, see the economy worsening (20 per cent), less customers/demand (19 per cent), increased costs of doing business (14 per cent) and poor business conditions, particularly in the U.S. and European economies (12 per cent).  The study also finds that one in three Canadian businesses believe the U.S. economy will underperform in the next five years and as a result have changed their plans to invest, expand and hire.  Also, one in four Canadian businesses indicate that a poorly performing U.S. economy will be their biggest challenge for 2012.

“Understandably, business owners are increasingly concerned about not only the U.S., where recession risks are rising, but Europe's prospects as well, given the sovereign debt crisis that has engulfed the region,” said Jennifer Lee, Senior Economist, BMO Capital Markets.  “Compared to when Canada's recession officially began in the last three months of 2008, exports over the May-July period this year have slipped 6.7 per cent. But while Canadian exports to China have surged 80 per cent over that period, they've declined nearly 10 per cent to the U.S. and nearly 22 per cent to Europe.”

For those Canadian businesses planning to expand, 54 per cent intend to open new operations or hire staff in external markets, while Canadian businesses planning to introduce new products and services or grow their business operations will do so domestically (38 per cent and 14 per cent respectively).

The top foreign markets for Canadian businesses looking to expand include: 

  • U.S. – 56 per cent
  • Europe – 34 per cent
  • Central and South America – 17 per cent
  • China – 15 per cent
  • India – 15 per cent
  • Mexico  – 12 per cent

“Coming out of the past recession, many Canadian businesses took deliberate steps to mitigate their risk. Where possible they sourced alternative suppliers and diversified to ensure they are not overly reliant on a single customer, sector or market; while making strategic spending decisions to boost innovation and enhance productivity,” said Cathy Pin, Vice President, Commercial Banking, BMO Bank of Montreal. “Despite a great deal of uncertainty in the global economy, Canadian businesses are well positioned to grow here at home and capitalize on opportunities in emerging markets,” added Ms. Pin.

Furthermore, according to BMO Economics, emerging markets are currently growing almost four percentage points faster than the industrialized (or developed) world with a six per cent jump forecasted for the year ahead, versus about 1.7 per cent in the industrialized world. 

“While exports to emerging markets currently account for almost seven per cent of Canada’s export share - accounting for nearly triple the share from 10 years ago - there is significant potential for growth for Canadian businesses in the years ahead,” added Ms. Lee.

The survey by Leger Marketing, was conducted on the phone between August 30th and September 16th, 2011, with a sample of 509 small, medium and large l business owners. A probability sample of the same size would yield a margin of error of ±4.4 per cent, 19 times out of 20.

 

 

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