Canadian business leaders are warning the country risks falling behind other industrialized nations because of what they consider the federal government’s failure to lay out a clear pandemic recovery plan, while many of the hardest-hit companies can’t absorb more debt.
The Trudeau government’s fiscal update Monday contained some positive measures, but pledging new economic stimulus worth up to $100-billion without laying the groundwork for how the money will be spent is worrying, according to several business leaders contacted Tuesday.
The government needs to provide a coherent plan for the future now, as other nations are doing, instead of waiting until next year, because businesses can’t plan in the absence of policy guidance, they said.
“It’s way too slow. We should be able to walk and chew gum at the same time,” said Michel Leblanc, chief executive of the Chamber of Commerce of Metropolitan Montreal, which represents 8,000 members. “We’re playing a dangerous game” if the government waits much longer because its energies could turn to other things such as a spring election, he said.
Countries that compete against Canada for business and investment dollars are “moving more aggressively” to reshape their economies while managing the pandemic, said Goldy Hyder, CEO of the Business Council of Canada. The country needs to be much more forceful in planning a recovery, including providing significant aid to distressed sectors such as energy and hospitality, he added.
“This government has made a choice to be sector-agnostic,” Mr. Hyder said. “That has caught up to them eight months into this, because I think what they’re now realizing is if those sectors disappear, or if the businesses in those sectors disappear, it is going to impact rising unemployment.”
The sector-specific relief announced Monday varied significantly by industry, ranging from a billion dollars in programs for the aviation sector – but not major airlines – to the redirection of a quarter of the now $2-billion Regional Relief and Recovery Fund to tourism businesses.
“What you see today is utter incoherence, not just across the country as a whole but even within provinces in terms of how the crisis is being managed,” said Perrin Beatty, CEO of the Canadian Chamber of Commerce.
Waiting until the next budget to outline a recovery plan could be too late for some businesses, said Norma Kozhaya, chief economist for the Conseil du Patronat du Québec, a group representing large employers in the province.
Asked about the concerns about recovery, a spokesperson for Finance Minister Chrystia Freeland said in an e-mail that “we are proposing to deploy meaningful and targeted stimulus worth approximately 3 to 4 per cent of GDP, over three years, to jump-start our economy when appropriate.”
Katherine Cuplinskas continued: “Canada has a well-deserved international reputation for smart and prudent fiscal management – and that will continue to be our approach.”
One of the key support measures announced Monday was the Highly Affected Sectors Credit Availability Program, or HASCAP, which came with the promise of government guaranteed loans worth up to $1-million with 10-year repayment terms and interest rates below market rate.
But “there’s a limit to the capacity of business to add more debt” when they have limited revenue, Ms. Kozhaya said.
The Canadian Federation of Independent Business has found that small businesses have accumulated an average COVID-19-related debt this year of $110,000. Its head, Dan Kelly, said that while HASCAP is better than nothing, “without a forgivable component, I worry it will stave, but not stop, the wave of bankruptcies businesses will be facing.”
Pat Cronin, chief risk officer at Bank of Montreal, said that with loan sizes capped at $1-million, the benefit will flow almost exclusively to smaller businesses. But, he added on a conference call Tuesday, “we think it will be beneficial … for the broader economy, and beneficial to employment in [hard-hit] sectors, so we’re highly encouraged.”
Dennis Darby, CEO of the Canadian Manufacturers and Exporters, said there was a lack of skilled labour in Canada before the pandemic, but it’s been amplified by the withdrawal of many people, especially women, from the work force in recent months. A national child-care program can’t come soon enough, he said. Many leaders noted that while Ottawa acknowledged this Monday, they felt that the government isn’t acting fast enough.
With a report from James Bradshaw in Toronto
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Published at Wed, 02 Dec 2020 01:04:00 +0000