Earlier this month, Rocco Rossi, the newly-appointed President and CEO of the Ontario Chamber of Commerce (OCC), unveiled the 2018 Ontario Economic Report, which reflects the thoughts of members from local chambers of commerce/boards of trade across Ontario.
This year clear trends have emerged that together demonstrate serious vulnerability within our economy, driven by low business confidence and a climate that discourages growth. Industry in Ontario is feeling the impact of a rising minimum wage and substantial labour reforms, increasing global and US competition, consistent over-regulation, rising input costs (particularly, electricity), and a tax system that is unable to relieve these pressures. All these factors are impeding the prosperity of Ontario’s businesses.
Businesses are losing confidence in themselves. In 2017, the OCC identified the “confidence gap” between how businesses view the economic outlook of their own organizations versus that of the province. At the time, the gap was 38 points, with business indicating a stronger confidence in their organizational outlook than Ontario’s. The gap has now narrowed to 31 points due to a dramatic decline in businesses’ confidence in their own prospects.
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. is is compared to only 31 percent who name competitive barriers such as declining consumer demand or changing client behaviour.
One in every four small businesses in Ontario projects 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 our economic growth.
The production of goods and services represent 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 indicates that Ontario has a higher-risk operating environment for business.
Our historically low unemployment rate is deceptive, as more people remove themselves from the workforce or simply give up the search. The share of Ontarians not in the labour force continues its rapid rise, highlighting one of the ways in which Ontario’s economy is structurally changing.
Arend Kersten, Director, Policy & Advocacy