No quick fix in sight for local businesses
‘Slower-paced’ economy may be the new normal, economist believes
There’s no silver-bullet solution that will help staunch the bleeding for Calgary’s struggling business community, says a local economist.
Over the summer, nearly 2,000 city businesses closed their doors for good and another 1,785 changed addresses, victims of a moribund Alberta economy that shows little sign of strengthening in the short term. All told, in the first nine months of 2016, more than 5,500 businesses have been shuttered, while a further 5,900 moved, numbers the Calgary Chamber of Commerce said haven’t been seen in a generation.
The three years previous, closures hovered around the 6,000 mark, reaching 6,300 in 2015.
But while Alberta has traditionally been a boom and bust economy, with financial chasms generally followed by peaks sparked by rising oil prices, University of Calgary economics professor Ron Kneebone said merchants hoping history will repeat itself may have to brace for the fact there may be no light at the end of the tunnel this time.
“This may be the new normal, that we may just be becoming a slower paced economy,” he said.
“There’s no bailout coming, so businesses are kind of on their own, so they’re going to have to manage their own way through tough times.”
Business leaders have blamed a host of new taxes and policy shifts for adding to the burden of already struggling businesses, including a mandated minimum wage hike to $15, a looming provincial carbon tax, alterations to WCB premiums and increasing corporate and property taxes.
On Tuesday, the Canadian Federation of Independent Business released a survey of its Alberta members that found 94 per cent weren’t confident in the provincial government’s vision to support small business and entrepreneurship, slamming the NDP’s Alberta Jobs Plan as “completely removed from the current economic reality.”
But Kneebone said there’s little that policy-makers can do to right the economic ship, given their own trying financial circumstances.
“Really, if I was running the government, I’d have to be saying, ‘Sorry, I can’t help you,’” he said, noting the one saving grace for businesses is a very low and stable interest rate.
“Governments are in a tough spot here, too. The government in Alberta is running $9-billion, $10-billion deficits, so there’s very little they can do.”
Calgary Coun. Ward Sutherland, vice-chair of the city’s finance committee, had a similarly grim outlook, and believes the pace of business closures will remain painfully brisk.
“It is going to get worse,” he said. “From all the forecasts and all the indicators we’re seeing, we’re going to have a very slow recovery.
“The days when it was a quick bounce back, that’s not happening.”
Sutherland lashed the provincial NDP for policies he said are hurting businesses, and noted the city will hold the line with zero per cent property tax increases for next year’s budget, and is challenging the province to reciprocate.
Beyond that, the northwest councillor said the best thing the city can do is offer breaks and incentives to help struggling businesses, such as allowing free street parking for businesses dealing with construction and streamlining the permitting process to make it easier for entrepreneurs to get off the ground.
“It’s not productive to take a whole bunch of money and give tax breaks out,” Sutherland said. “It’s not going to make the difference between people staying in business and not staying in business.”
In January, Coun. Evan Woolley pitched a $60-million plan over two years to provide small businesses with tax breaks funded through city reserves.
However, the plan was rejected after fellow councillors questioned whether the fund would have any real effect.
Woolley said he hopes the city’s upcoming mid-cycle budget review will include something to reduce the strain on businesses, which have often shouldered a heavier tax load in good years.
“The business community in Calgary has paid a disproportionately larger share of taxes than residential,” he said.
“When times are good, the businesses have been paying their share, or more. So when times are bad, it’s incumbent upon us to help the business community.”
The government in Alberta is running $9-billion, $10-billion deficits, so there’s very little they can do.