Foreign investment down by 24% last year amid mass tech layoffs
Foreign direct investment in the Montreal area slumped 24 per cent last year as technology companies scaled back expansion plans and some industrial projects were scrapped due to a lack of available power.
Quebec's biggest metropolitan area attracted 87 foreign direct investment projects worth $2.74 billion last year, Montreal International, the city's non-profit investment promotion agency, said Monday. The tally, which is down from a record 102 projects worth $3.58 billion in 2022, nevertheless represents the third highest in Montreal International's 28-year history.
With Germany, Japan and the U.K. all mired in recession, so-called greenfield, or new, investment projects in developed economies fell 16 per cent last year, according to data released in January by the United Nations Conference on Trade and Development. On a global basis, foreign direct investment flows rose three per cent. Foreign investment into North America was flat, UNCTAD also said.
“It was a rock 'n' roll year,” Montreal International chief executive Stéphane Paquet told reporters Monday morning. “The big tech players are laying off people by the thousands, the hundreds of thousands. For us, this means investment projects that are either delayed or cancelled. What's more, many of these tech employers are no longer there when we organize recruitment missions abroad.”
As Quebec works toward a goal of eliminating greenhouse gas emissions by 2050, Montreal International says it's now focusing on projects that are sustainable or that meet essential needs in strategic value chains.
Clean technology and environmental-services companies were the most active last year, committing $643 million, or 24 per cent, of all projects supported by Montreal International. Investors included German logistics and shipping company DHL, which picked Montreal to start the electrification of its nationwide vehicle fleet, and Norwegian recycling company Tomra, which acquired equipment to improve recovery processes.
Montreal also attracted $421 million worth of life sciences and health-care projects, and $346 million of cybersecurity and information technology projects. Results in IT would have been higher if two major projects, which Paquet declined to identify, hadn't been shelved.
“Everything that was It-related, video games, software, all those companies used to invest massively,” he said. “Now the trend is not the same. When interest rates started rising, several of those companies that weren't profitable decided to slow their investments to focus on profitability.”
Energy availability has also emerged as a major hurdle now that Quebec has tightened approval criteria amid soaring industrial demand. Any project requiring at least five megawatts of power must be approved by the provincial government. Until last year, the threshold was 50 megawatts.
“It's a mathematical reality. We don't have the required electricity to respond to everyone who wants power,” Paquet said. “Surpluses are no longer what they were, and it's clear that this has an impact on our results.
“In previous years we had projects that were eating up a lot of energy,” he added. “The electricity was there so we could work on them. Nowadays, we don't have as much electricity as we used to have.”
U.S. investors were once again the most active in 2023, accounting for 26 per cent of total investment in the Montreal area. France ranked second with 23 per cent.
As the economic picture darkens, foreign investors are taking more time to make firm commitments. It now takes 533 days on average for a project to materialize in Montreal, about three months longer than was the case in 2022, Paquet said.
Asked about the effect of legislation such as Bill 96 or the recent university tuition increases on the attractiveness of Montreal as an investment destination, Paquet wouldn't get dragged into a political debate.
“I may agree, I may disagree sometimes with the Quebec government. When I am concerned, I take the phone and I give them a call,” he said.
“When it comes to foreign students, we made our recommendations during the parliamentary commissions.”
Combined, the 87 new investments completed in 2023 led to the creation of 5,983 jobs with an average annual salary of $97,500, Montreal International said. In 2022, the total was 8,287 positions with an average salary of about $88,000.
Montreal International also helped local employers recruit 1,136 qualified foreign workers and students in 2023 — about one-third of whom were nurses or teachers. Some 109 local employers took part in Montreal International-led recruitment missions, ranging from Bombardier to Fujitsu and the Quebec Construction Commission.
The 2023 results “show a decline in the metropolis's attractiveness on a global scale,” municipal opposition leader Aref Salem said in a statement. “Montreal International is doing a remarkable job. That said, the Plante administration must redouble its efforts to keep Montreal on the map.”