Amid strong economic recovery, declining non-private residential investment is one of many weak spots, warns BC Chartered Professional Accountants
With the dark days of 2020 well behind us, BC’s investment climate continues to heat up.
The latest edition of BC balance sheet: Investan annual report from British Columbia Chartered Professional Accountants (CPABC), delivers this good news. The report, which rates the province as a place to invest by weighting economic indicators such as housing starts, business activity and capital spending on major projects, also offers some warnings.
Since the COVID-induced recession bottomed out in the summer of 2020, British Columbia has experienced one of the strongest economic recoveries in Canada, notes CPABC. A sign of recovery is the number of businesses operating in the province, which now exceeds pre-pandemic levels. The total stood at 152,048 last November, up 2.3% from January 2020.
When it comes to industries, however, the pandemic has produced winners and losers. Information and culture led the way with 2,052 businesses in November, an 8.7% jump from January 2020. Close behind were professional services (up 7%), followed by the food industry (up 5.1%).
As the report points out, businesses that rely on human interaction still face challenges. One of the biggest casualties is tourism, whose total number of active businesses fell 1.9% over the same period, to 12,867.
“It will be important to help industries that still face challenges through skills training for displaced workers and business support,” said Lori Mathison, president and CEO of CPABC, in a statement.
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Mathison went on to highlight an industry that has weathered the pandemic better than most: price and demand.
Across British Columbia last year, construction began on 43,360 housing units, a slight increase from the previous peak in 2019 and 24.3% more than in 2020. Nearly 80% of these properties were attached units such as condos and townhouses, according to the CPABC report.
Big projects like the Broadway Subway Project and LNG Canada were another bright spot in 2021. Together, the value of these companies rose to $394.3 billion in the third quarter, a 6.4% year-over-year gain.
The picture is less bright for private non-residential investment, which covers maintenance, modernization and construction. This category shrank to $4.4 billion last year, from $5 billion in 2020 and $7 billion in 2019, according to CPABC.
Meanwhile, inflation-adjusted gross domestic product per capita remains sluggish. CPABC forecasts an average of $53,623 for 2021, up 4.1% from the previous year, but just below $53,983 for 2019. This will permanently reduce our provincial GDP outlook,” warns The report.
In contrast, BC’s net debt-to-GDP ratio continues to rise. That number will climb to 22.8% in 2024-25, according to provincial government plans, from 17.8% in 2021-22.
Although investment activity has accelerated significantly over the past 18 months, Mathison said challenges remain. “Given the continued decline in private non-residential investment, it will be important to target policies that encourage and attract business investment to help boost our productivity and incomes,” she said. “It will also be important to create a plan to return to balanced budgets and control debt, especially as the Bank of Canada has begun raising interest rates.”