Montreal Gazette

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.”

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