With a mission to inform, empower, celebrate and advocate for British Columbia's current and aspiring business leaders, BCBusiness go behind the headlines and bring readers face to face with the key issues and people driving business in B.C.
Issue link: http://digital.canadawide.com/i/1441359
JANUARY/FEBRUARY 2022 BCBUSINESS 53 SOURCES: STATISTICS CANADA AND BC STATS; BUSINESS COUNCIL OF B.C. FORECASTS 8. Supply chain woes stretch…on and on For B.C. businesses in a wide range of industries, global supply chain disruptions keep making it tough to serve their customers. "The view that they'll soon sort themselves out seems a fairly optimistic assump- tion at this point," Williams says of those troubles. "They look like they're going to be around for quite some time." Just ask one of Wells Fargo's biggest manufactur- ing clients, which recently announced that because it can't get all the parts to fill its orders, it needs at least 18 months' relief from the banks. "This is the market leader in North America for what they do, and they're worried about that," Davis says. Besides absorbing the cost of borrowing capital, the publicly traded company could see its market capitalization shrink, which makes it harder to borrow, he explains. Also, frustrated customers might look elsewhere—and a rival could step into the void. "That's terrifying." 9. Stepping back from the business investment cliff? As the saying goes, you have to spend money to make money. But in Canada, business investment per worker has been falling for several years, according to recent research by the Toronto-based C.D. Howe Institute. "So we are becoming less industrialized—we have less cap- ital equipment, less technology, less innovation, less research and development per worker than we did the previous year or five years ago," Williams says. Lately, with help from deep- pocketed foreign investors, several B.C. businesses have reached unicorn status. "But what matters for the coun- try and what matters for real incomes across the country is what's happening at the average firm," Williams says. "At the average firm, there's less investment per worker going on over time, and the capital stock is actually shrinking on a per-worker basis." Yu expects the tide to turn in B.C. "As businesses get more certainty in the market—they understand where the demand is, things are reopening and they're not going to close—they are going to move back into reinvesting in their operations," he says. Yu also thinks that given labour shortages, some com- panies will look at software and equipment to boost productivity. "Possibly they'll have less of a need for as many employees." 10. Either way, climate change will cost us If there was ever any doubt, last year's raging forest fires and catastrophic floods made it clear that climate change is a major threat to B.C. But not everyone is happy about our policy responses to this existential crisis. For his part, Peacock sees the provincial carbon tax adding to already soaring energy costs. "At the end of the day, the carbon tax in B.C. is going to hit consum- ers' pockets, and it's going to hit businesses as well." Companies with a domestic customer base can pass on those extra costs, Peacock adds. For export- ers, though, there's no such option. "Most of our big exporters, the ones that really matter, are not in a position to adjust their prices," Peacock says. Among jurisdictions with a price on carbon, B.C. is one of the few without a cap-and-trade system or other mechanisms to shield exporters, he explains. "Over time, what this means is a less productive export sector, and companies are going to be less will- ing to deploy capital and make investments in B.C., unless the policy framework is realigned," Peacock says. "I think that weighs on the export sector over the next three, five, seven years here in B.C." For the CCPA's Alex Hemingway, high oil prices are yet another reason to move to renewables. "One of the issues that's happening in terms of the lagging climate progress is the power of the fossil fuel industry," he says, also citing lobbying efforts against employer- paid sick says and a wealth tax. "It gets at the power of these lobby groups to shape the policy agenda and throw some dirt in the gears when there's a fear that it's going to affect their interests." 11. Keeping an eye on China To put economic pressure on other countries, an increasingly assertive China doesn't hesitate to slow or halt imports, whether that's Canadian canola or Australian coal. How vulnerable is B.C., given frostier- than-ever relations between Ottawa and Beijing? In Wells Fargo's local client base, the biggest single industry is forest products, which Davis calls the best 2022 B U S I N E S S and E C O N O M I C "At the end of the day, the carbon tax in B.C. is going to hit consumers' pockets, and it's going to hit businesses as well" –KEN PEACOCK, Business Council of B.C. BETTER DAYS The Business Council of B.C.'s economic outlook calls for the rebound to continue in 2022 ANNUAL % CHANGE UNLESS OTHERWISE INDICATED; f = FORECAST 2020 2021f 2022f 2023f Real GDP –3.4 5.0 4.0 2.6 Employment –6.5 7.2 3.2 2.2 Unemployment rate (%) 8.8 6.5 5.4 5.0 Housing starts (000 units) 38.0 47.5 45.0 42.0 Retail sales 1.3 13.5 6.0 6.2 B.C. Consumer Price Index 0.8 2.8 3.5 3.5