September 3, 2021

Weekly EconMinute—Obstacles to business growth

In this week’s EconMinute, we’re talking about obstacles to business growth.

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The most recently reported quarterly GDP numbers (for the second quarter of this year) show Canada’s economic recovery stalled, falling well short of the strong growth initially anticipated. In fact, Statistics Canada’s early estimate for the month of July even shows a modest contraction, driven by weakness in manufacturing, construction, and retail trade.

This brings into question just how resilient Canada’s economy is and how quickly it will recover. We were curious, therefore, to know what obstacles businesses anticipate in the coming months in order to get back to full capacity, especially businesses here in Alberta.

Based on Statistics Canada’s recent survey of businesses, there are a couple of key obstacles that could stand in the way of a full and speedy recovery.

So, what do Alberta businesses identify as key concerns over the coming months?  

  • The top most commonly cited concern in Alberta is the rising cost of inputs. Respondents in Alberta were more likely than those in other provinces to report this as an obstacle: nearly half of all businesses (46%) in the province, compared with 39% nationally. 
  • As for which inputs, the survey provides a couple of clues as to what might be driving this: the cost of insurance and transportation.
  • Specifically, 35% of Alberta businesses report concerns regarding the cost of insurance, compared with 25% nationally. This is especially true for certain industries: natural resources, transportation and warehousing, construction, and accommodation and food services.
  • Though an increase in insurance premiums has been reported as a national issue, especially among food and hospitality businesses, some other factors like hail storms, along with other natural disasters over the last few years, seem likely to be weighing more heavily on Albertan businesses. In addition, some companies are beginning to restrict insurance for oil and gas companies, potentially driving up prices.
  • Transportation costs are also a growing concern: 29% of Alberta businesses noted this as a barrier, versus 23% nationally. Industries most likely to list this as a concern include construction, natural resources, transportation and warehousing, and manufacturing.
  • Transportation costs are likely to be related to global supply chain issues as well as the cost of fuel. Why Alberta businesses are more likely to report this as an issue is a little less clear. In particu lar, Real Estate and Professional, Scientific and Technical Services businesses in Alberta are more than twice as likely to report this as a concern.  

While the drivers of transportation costs may mostly be beyond provincial or even national control, the cost of insurance is not. This is something to watch closely, especially if it continues to be an issue felt more acutely among Alberta businesses. Further research may be warranted to ensure that Alberta businesses see a strong recovery, paving the way for longer-term economic growth.

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