Renewed optimism seen from businesses

Canadian entrepreneurs are regaining confidence in the business environment, with optimism around the economy up 34 percentage points compared to the last quarter of 2020, according to a new BDC survey, conducted in December, of 1,000 business owners.

While still below pre-pandemic levels, that optimism has spurred renewed interest among entrepreneurs to increase spending, despite concerns about economic uncertainty, low demand and limited funds with which to invest.

Here's what BDC found:

❚ Investing in productivity: Forty-six per cent of respondents said becoming more efficient or productive was their top investment goal for the next 12 months.

Entrepreneurs also identified sales and marketing, as well as launching new products, as key investment areas.

Betting on intangibles: The report found that spending in intangible assets is gaining momentum.

Of the businesses that plan to invest this year, 53 per cent said they would put their money in assets like software and intellectual property; 46 per cent said they planned to invest in machinery and equipment and 35 per cent planned to spend on non-residential buildings and renovations.

❚ A sales surge in the offing: For the first time since the start of the pandemic, more companies expected sales to increase than to decrease, with 38 per cent optimistic compared to 25 per cent of respondents who expressed pessimism around sales. Large companies (55 per cent) were more likely than small- and mid-sized companies to expect increased sales.

A regional divide: Business confidence varied substantially by region, with entrepreneurs in Quebec and the Atlantic provinces reporting the greatest intention to increase investing. Companies in the Prairies were most likely to expect sales to decrease over the next 12 months; entrepreneurs in the region were also most likely to anticipate worse economic conditions overall in 2021.

Operating at capacity: Half of the respondents said they were operating at or beyond full capacity, and would struggle to meet an unexpected surge in demand.

Fifty-four per cent of entrepreneurs also said they were having at least some difficulty hiring workers.

“This is likely due to capacity problems created by lockdowns and other sanitary measures,” the report reads.

Regions most confident in the economic outlook for 2021 were also the most likely to face capacity challenges.