Sask. seeing sluggish growth: study
- 20 Sep 2016
- The StarPhoenix
- BRUCE JOHNSTONE
Sask. seeing sluggish growth: study
Small-, medium-sized companies struggle after oil-price collapse
From 2001 to 2013, the number of businesses in Saskatchewan grew by just under 14 per cent, significantly below the national growth rate average of 20 per cent, according to a new study by Business Development Bank of Canada (BDC).
“Saskatchewan did OK, (with) an increase of 14 per cent,’’ said Pierre Cleroux, chief economist with the BDC. “But that’s between 2001 and 2013. Over the last two years, the situation has changed a little bit.’’
With the collapse of oil prices during the last two years, Saskatchewan business growth has, if anything, deteriorated, Cleroux added. “These are the most recent data from StatsCan, but the situation is not as good right now.’’
And the slow growth of Saskatchewan businesses is symptomatic of a deeper malaise within Canadian business, with small- and mediumsized companies struggling to grow and only one in 1,000 businesses growing past the 100-employee mark during the same 13-year period, BDC said in the study released Tuesday.
Canadian small- and mid-sized companies are experiencing slow-to-no-growth, with far fewer businesses expanding in size compared with 15 years ago. Only a tiny fraction of small businesses — 0.10 per cent or one in 1,000 — grew past the 100-employee mark over the study period. That represents a 40 per cent drop from the 0.18 per cent of small businesses that did so in 2001.
Mid-sized firms (with 100 to 499 employees) also are struggling, the study said. They made up less than one per cent of the total number of Canadian companies in 2013, a drop from 1.04 per cent in 2001.
“Generally speaking, business growth is slower. There’s not as many new business startups and not as many Canadians starting businesses as before,’’ Cleroux said.
“The smaller businesses aren’t becoming mid-sized firms. They’re staying smaller than before (2001),’’ Cleroux said. “The growth in the startups of manufacturing firms is actually negative.”
The only segment that’s growing is “micro-enterprises” — companies with one to four employees — which saw their portion of the total go up, albeit by less than one per cent — from 75.66 to 76.55 per cent — between 2001 and 2013.
Cleroux said research by BDC and other organizations links the decline in startups and growth among small- and medium-sized enterprises, in large measure, to demographic changes in Canada’s population.
“The most important reason is the aging population,” Cleroux said.
“Most people start a business between the age of 25 and 45; this group of people in Canada is not growing. The group that is growing is 65 and over.”
Moreover, young people are not as entrepreneurial as they were 20 or 30 years ago. “Young people are not starting as many businesses as they did in the past. The job market is relatively good, so maybe they don’t see (entrepreneurship) to be as good an option as a job,” Cleroux said.
“We used to champion entrepreneurship more in the past. Maybe we haven’t done a good job over the last few years to show young people that being an entrepreneur is actually a great option in terms of a career. It’s not for everybody, but for many people, it’s been a very good career path.’’
Cleroux said BDC has identified three main factors that differentiate growing companies from their slower counterparts:
Invest in productivity. “Businesses that are more productive than others are actually able to grow faster than other businesses.’’ Productivity per worker is nearly 30 per cent greater at large companies than at mid-sized ones.
Invest in fixed assets. “In an age when technology is changing so rapidly, companies that are growing more invest more than others.” Fixed assets at mid-sized businesses are worth $51,000 per employee versus $100,000 in large companies.
Diversify geographically. “The most successful companies are exporting outside their provinces and the country.’’