|Input Costs Soar as Confidence and Projected Profits Fall: Ontario Economic Report 2018|
Today the Bay of Quinte Chambers of Commerce , in partnership with the Ontario Chamber of Commerce (OCC) released the second annual Ontario Economic Report (OER), a comprehensive analysis of data and emerging trends on the economic health of the province. Original economic research from the report reveals that 77 per cent of Ontario businesses say access to talent remains the largest impact on their competitiveness and nearly half report a lack of confidence in the province’s economy. Meanwhile, a lack of confidence in their own ability to sustain profits continues to decline.
The OER includes data from the OCC’s Business Confidence Survey conducted by Fresh Intelligence, a Business Prosperity Index developed by the Canadian Centre for Economic Analysis (CANCEA), and a 2018 Economic Outlook prepared by BMO Financial Group.
“Industry in Ontario are feeling the impact of the rising minimum wage, significant labour reforms, increasing global and US competition, NAFTA renegotiations, consistent overregulation, rising input costs, and challenges to accessing talent,” said Rocco Rossi, President and CEO at the Ontario Chamber of Commerce. “This year’s Ontario Economic Report indicates that these challenges are creating a climate of low business confidence that will compromise the province’s future prosperity.”
According to OER findings, 68 percent of firms say the minimum wage increase is predicted to have a negative impact on their business. Compared to last year, they are more likely to project a decline in revenue and a shrinking of their workforce.
Some of the 2018 OER highlights on the outlook of Ontario’s economy include:
● Businesses are losing confidence in Ontario’s economy. In 2012, 47 percent of businesses reported they were confident in Ontario’s economic outlook. Today, that share has been halved, as only 23 percent of businesses are confident in the economy.
● Nearly two-thirds of businesses cite input costs for their lack of confidence, such as the price of electricity, taxes, and the increase in minimum wage. This is compared to only 31 percent who name competitive barriers such as declining consumer demand or changing client behaviour.
● One quarter of small businesses in Ontario project declining revenue in 2018, which is twice the rate of large firms (26 percent vs. 13 percent). Given that the majority of businesses in this province are small, this will likely have a net-negative impact on economic growth.
● The production of goods and services represents a shrinking contributor to business prosperity. Production activities represent only 15.3 percent of business prosperity, meaning that prosperity is increasingly becoming more dependent upon financial activities instead of productive activities. This is indicative of Ontario possessing a higher-risk operating environment.
● Our historically low unemployment rate is a red herring, as more individuals remove themselves from the workforce or simply give up the search. The percentage of Ontarians not participating in the labour force is at a recent high of 35 percent, contributing to employers’ on-going struggle to attract talent.
“This important report identifies key vulnerabilities within our economy, and provides decisions makers and community leaders with the understanding needed to find the solutions that will drive our economy forward,” said Emily Cowan, Executive Director at the Prince Edward County Chamber of Commerce. “This year, the Ontario Chamber Network will continue to engage and advocate on behalf of Ontario’s business community to explore these issues and develop the necessary solutions for a more prosperous Ontario.”
“The unemployment rate in the area is at an all-time low and our employer’s face the struggle outlined in the report. Over the past year, we have been working with partnering agencies to ensure we have better and more accurate workforce data so we can help identify whether this is a result of an aging or unskilled workforce. Either way, the information is critical to a plan of action to sustain the small businesses that represent the backbone of our economy in Belleville and the region,” stated Jill Raycroft, CEO of the Belleville Chamber of Commerce.
“It is discouraging to see that one quarter of small businesses (those with less than 100 employees) are expecting to see a decline in their revenue this year,” said Suzanne Andrews, General Manager at the Quinte West Chamber. “Seeing as these companies make up the vast majority of companies in this region there is cause for concern, the top reasons cited are regulatory/tax burdens and increased pricing of input costs, such as raw materials, wages and energy. Ensuring small businesses can continue to be profitable and create jobs in their communities has to be a priority for Ontario.”
In addition to new economic research, the OER outlines the areas of focus for the OCC’s policy and advocacy work in the year ahead. In 2018, the OCC will be looking at the potential of the health and life sciences sector, examining challenges related to urbanization and housing affordability, and studying the critical transportation needs across the province. As businesses continue to cite access to talent as a top challenge, the OCC will continue to provide proactive recommendations and solutions to ensure we are leveraging our greatest asset—human capital.
For more information about the OER, visit: www.occ.ca/ontario-economic-report
The Ontario Chamber of Commerce is Ontario’s Business Advocate.
The Bay of Quinte Chambers of Commerce is the regional voice for the Belleville, Prince Edward County and Quinte West Chambers of Commerce. Representing over 1200 businesses of all sizes and all sectors located in the Bay of Quinte riding, this regional voice advocates for fair government policies that allows businesses to thrive and prosper.