CEOS FEAR RUIN FROM PANDEMIC
Survey finds one in four worry their firms won’t survive economic hit of COVID-19
Business leaders are usually an optimistic bunch, but about a quarter of Alberta corporate CEOS aren’t fully confident their organizations will survive the global pandemic until a vaccine is made available or the population reaches herd immunity, according to a new survey.
As the province has moved into the second stage of its economic relaunch, a survey of chief executives for the Business Council of Alberta is shining a spotlight on the economic concerns surrounding the COVID-19 crisis.
The survey finds six in 10 CEOS anticipate demand in their markets will be slow to recover, while almost one in five expect they won’t refill lost positions.
The responses highlight the weak levels of confidence going forward, “indicating a longer-term recession and a long time before business gets backs to pre-crisis capacity and employment,” according to the report.
“About a quarter of businesses have at least some concern they may not survive. That’s a troubling finding,” said Mike Holden, the council’s chief economist.
“It’s evidence that it is a slow uphill climb to get back to where we were.”
Faced with the twin challenges of low oil prices and the coronavirus in 2020, Alberta is expected to see its most severe one-year economic contraction. The Conference Board of Canada projects Alberta’s GDP will shrink by 6.8 per cent this year.
As thousands of businesses were forced to close this spring, Alberta’s unemployment rate soared to 15.5 per cent in May.
Many companies have seen sales plunge and have reacted by reducing expenses, cutting staff and taking on debt. The survey, conducted last month by Viewpoint Research of 61 corporate leaders representing some of Alberta’s largest firms, found nine in 10 CEOS reported a moderate or significant drop in business revenues.
In response, almost two-thirds have deferred or cancelled capital projects, and a majority said they have laid off some staff.
Some companies have also reported seeing a credit crunch. About one-quarter are experiencing difficulty with liquidity, despite federal programs designed to address the problem.
The federal emergency wage subsidy program, which has been extended through August, has been relatively successful and widely used by businesses, the group says.
According to the report, the top three barriers to resuming normal business operations in Alberta are the impact of low oil prices (even among non-energy companies), weak global demand for exports, and a change in consumer preferences.
Aroon Sequeira, founder and chair of Edmonton-based Sequeira Partners, which provides merger and acquisition advisory services, said the “double whammy” of the virus and low oil prices appears to have dented optimism in the province.
He said it will take time for businesses he’s involved in to return to PRE-COVID activity levels, but remains confident they will survive. However, Alberta companies that were struggling before the virus outbreak may not have “the staying power and resiliency to come back,” he noted.
“It will take a year, a year and a half, to get back to regular levels, taking into account COVID recovery, taking into account some bounce back in the oil and gas sector, and taking into account the global recessionary factors,” Sequeira said.
“Albertans are resourceful and entrepreneurial. We have a young, well-educated workforce, so I do believe we will have recovery.”
There have been a few early signs of improvement in the economy, including oil prices recovering to close Friday at US$36.26 a barrel for West Texas Intermediate crude.
Last week, the province moved into the second stage of its economic relaunch, allowing gyms, swimming pools, arenas and movie theatres to reopen with some restrictions.
However, the pace of the economy rebounding remains a nagging concern for business leaders.
Some 80 per cent of provincial businesses anticipate a slow recovery, according to a recent survey by the Alberta Chambers of Commerce, Community Futures Alberta and Economic Developers Alberta.
(That survey found more than 90 per cent say they’re likely to keep operating after the COVID-19 crisis passes, including 61 per cent who said it was “very likely” they would keep operating.)
One of the biggest concerns moving forward focuses on employment.
The Canadian Federation of Independent Business reported lack week almost half of small businesses across the country have temporarily laid off staff and 10 per cent have done so permanently.
At Mullen Group Ltd., a trucking and logistics organization that operates across Western Canada and Ontario, CEO Murray Mullen said Friday it appears the economy is starting to pick up as more companies reopen and consumers start to spend money on non-essential goods and services.
The Okotoks-based company recently brought back about 20 per cent of 1,000 employees who were temporarily laid off earlier this year. Mullen expects more people will be called back as demand picks up.
“By the end of the third quarter, I hope I’m up to 50 or 70 per cent — and then maybe 90 per cent or thereabouts in 2021,” he said. “But I don’t know if we will bring everybody back. I have to be blunt about it. I just don’t know. There are a lot of unknowns in the world today.”
Holden thinks some of the broader business concern is rooted in the uncertainty around the public health situation and whether there will be a second wave of COVID-19.
“It’s going to be hanging over our heads like the sword of Damocles. And with that in mind, nobody is expecting us to snap back to January or February levels of economic activity,” he added.
“It is a long road to recovery, especially on returning to normal levels of employment.”