Counting the cost of doing business in a pandemic
Frédéric Tomesco looks at what COVID-19 has taught us about economic resilience
Behaviour Interactive founder and chief executive Rémi Racine chuckles when asked to highlight his biggest takeaway from 2020.
“The lockdown totally changed my view on working from home, 180 degrees,” said Racine, who runs Canada's largest independent video-game studio and would normally spend most waking hours at his Mile-ex headquarters. “I didn't believe in remote work, but I have to say, productivity has been remarkable. We're very close to 100 per cent. Some of my programmers tell me they're performing better than when they're in the office.”
Economically speaking, 2020 will go down as the year of the spring lockdown — and the year Quebec and the global economy discovered the power of teleworking.
Along the way, as Ottawa and Quebec unlocked billions of dollars in emergency subsidies, entire industries rushed to boost their online presence, build delivery systems and pivot toward a future once thought to be decades away.
Martin Coiteux, chief economist at the Caisse de dépôt et placement du Québec, sums it up this way: “In 2020, we learned to use teleconferencing technologies.” The former Quebec municipal affairs minister added: “We saw the potential. I don't think these technologies will replace everything that we did before, but they will take a certain share.”
Quebec was one of the first provinces, along with Ontario, to impose strict lockdowns in mid-march. Premier François Legault shut down large swaths of the economy — and the toll on businesses and employment was as punishing as it was immediate.
Downtown Montreal became a ghost town and 10 million foreign tourists vanished into the ether, putting a massive strain on the city's finances, not to mention those of its hotel owners.
Quebec's economy lost 820,000 jobs during the first two months of the pandemic, according to the provincial statistics institute. Unemployment in Quebec peaked at 17 per cent in April before gradually sinking back to 7.2 per cent in November.
By last month, the province had erased about 87 per cent of its 2020 job losses, exceeding Canada's 81 per cent score, according to Mouvement Desjardins senior economist Hélène Bégin.
Coiteux says Quebec's economic diversity played a key role in rebounding so quickly. Diversification “is allowing Quebec to perform better than the Western Canadian economies, which are more dependent on fossil energy sources.”
Still, while Quebec bounced back faster than anticipated, “it's been an uneven recovery,” Bégin said. “Many sectors, such as tourism, hospitality, culture and aerospace continue to suffer. It's clear that we are going to lose some players. Some sectors are going to come out of the crisis weaker than they were.”
Retail, for one, will enter 2021 in a much different state.
With malls ordered shut until June, many retailers fell on hard times. Once-iconic fashion chain Le Château Inc. filed for bankruptcy protection in October and is now liquidating assets. Davidstea Inc. and Reitmans Canada Ltd. were among chains that sought creditor protection.
Winners? There were a few — among them supermarket chains, sporting goods makers, construction companies and home improvement retailers. Their common traits? “They are using technology to engage their audience and continue to transact,” says Dax Dasilva, CEO of Montreal-based e-commerce software maker Lightspeed POS Inc. “Everybody has to come up with new strategies to sell. Our belief is that some of those strategies are going to build more resilient and bigger businesses.”
Michel Leblanc, head of the Chamber of Commerce of Metropolitan Montreal, credits a “can do” ethos for the speed at which many Quebec companies adapted. Some even shifted to making personal protective equipment in a matter of weeks.
“You really saw the entrepreneurial spirit come alive this year,” said Leblanc. “You saw companies start making masks, disinfectant, bulk up their online offering. The adjustment was phenomenally quick.”
Throughout the chaos, Quebec's biggest city — and economic powerhouse — held its own.
Employment in Montreal fell one per cent from February to October, according to data compiled by Montreal International, the city's investment promotion agency. That's the best performance among 20 major Canadian and U.S. population hubs tracked by the organization.
“Our economic base is extremely robust, probably a lot more than many people give it credit for,” Leblanc said. “As soon as companies were able to start hiring again, they did so. Let's not forget that we were in a workforce shortage situation before the pandemic. When the economy restarts, the jobs will be there, and so will the workforce shortage. So we'll need to talk about immigration again.”
While some investments fell by the wayside — Mitsubishi Aircraft quietly pulled the plug on a design centre in Boisbriand — other businesses stepped up, including Enerkem, which unveiled plans to build an $876-million biofuel production plant in Varennes.
Real estate also saw its share of activity. In July, developer Brivia Group began construction of 1 Square Phillips, a 61-storey project valued at $560 million that will become the city's tallest residential tower.
“Companies and promoters are determined to carry on, even when there are clouds on the horizon,” Leblanc said. “You wouldn't have seen this 10 or 15 years ago.”
That confidence is also reflected in Quebec home prices, which are on track to climb about 15 per cent in 2020, according to Desjardins estimates. That would mark the strongest year for real estate in about two decades.
Bégin pins this renewed appetite for property in part on an unintended consequence of the pandemic — a jump in savings rates. Quebecers saved 35 per cent of their net earnings in the second quarter, up from 10 per cent in the fourth quarter of 2019, data show.
“Nobody expected real estate to be so strong,” said Bégin. “Many Quebecers directed their savings toward property, either by buying a larger house or by renovating. Some started paying down debt. This could help the economy in 2021.”
It's just as well that many companies are open to letting work
ers spend more time at home.
Even after the pandemic, teleworking will continue to be widespread, says Mcgill University management strategy professor Karl Moore. Many CEOS have come around to the idea that workplace flexibility will be an important component of personnel strategy, he said.
Of the more than 40 top executives who addressed Moore's classes — virtually — since the pandemic began, “almost everyone said that people won't be at work to the same degree that they were before,” said the professor. “It makes you wonder about the value of downtown office towers.”
Behaviour's CEO is typical of this mindset. Racine says his company has decided to allow employees to work from home permanently — if they so choose — when the health crisis subsides after staff surveys showed about 20 per cent support the option.
“Some of our people are extremely happy to work from home,” he said. “Me, I'm one of those folks who want to be in the office four or five days a week, and that won't change. But I realize work from home is here to stay. Entrepreneurs like me can change their mind, even if they are stubborn.”
Many sectors ... continue to suffer. It's clear that we are going to lose some players.