Biz investment per worker fell amid weaker competition: StatCan

Canadian business investment per worker plummeted by 20 per cent over a 15-year stretch, according to new Statistics Canada research that suggests weaker competition is partly to blame.

The report finds for every worker, businesses invested $628.80 less in their companies in 2021 than they did in 2006.

The decline was more significant in large and medium-sized companies and foreign-controlled businesses, though it’s unclear why that was the case.

The report attributes nearly one-third of the drop to declining entry rates, or the number of new companies starting up by industry.

“Economists always believe that competition promotes investment. When you look at our data, there’s a decline in the share of new firms,” said Wulong Gu, the study’s author.

Canada is struggling to increase labour productivity amid low business investment, an issue that has been raised frequently by business groups and economists in recent years.

Capital investment, which refers to spending on everything from real estate to machinery, helps businesses grow and make their employees more productive.

That’s why economists argue capital investment is critical to growing the economy and improving living standards.

The report says the slowdown in investment coincided with a shift toward intangible assets such as brand equity and patents, which national statistical agencies don’t record as investments.

However, that shift doesn’t explain why business investment in Canada lags that in other countries, said Wu, because intangible assets are not recorded as investments elsewhere, either.

The study also found no relationship between profitability and business investment, which Wu said was “surprising.”

Canada’s competition watchdog released a report in the fall that found competition weakened over the previous two decades as profits and markups rose.