Even after enduring measures aimed at controlling the spread of COVID-19 -– and, in many cases, declining revenues and profits – businesses in the National Capital Region say they believe economic conditions will deteriorate further before the economy starts to recover.
Ottawa’s business confidence index – a composite calculation based on surveys of hundreds of business leaders conducted as part of the Welch LLP Ottawa Business Growth Survey – dove deeply into negative territory in mid-2020, a dramatic reversal of the consistently positive outlook expressed by respondents each year since Ottawa’s business confidence index was launched in 2013.
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Declining confidence was recorded across all sectors, with the hospitality industry – hit hard by travel restrictions and disruptions to conference bookings – seeing the sharpest drop.
And even though the Welch LLP Ottawa Business Growth Survey was administered at a time when the economy was starting to gradually reopen amid relatively low numbers of COVID-19 cases in the community, half of all respondents said the market for their business will get worse in their current fiscal year.
“There’s a sizable group of Canadians who worry about a second wave (of COVID-19) and don’t think this is over,” says David Coletto, the CEO of Abacus Data. The local market research firm administered the Welch LLP Ottawa Business Growth Survey and analyzed the results.
He notes that even if the health crisis was relatively under control in Ottawa and most of Canada this summer, businesses – particularly those dependent on the U.S. and other markets – won’t be able to fully recover until the pandemic is curtailed south of the border and overseas.
There are, however, a sizable number of local businesses that reported rising revenues and plans to recruit new employees. That’s supported by anecdotes from across the city of manufacturers switching into overdrive to produce personal protective equipment, tech firms that seamlessly switched to remote work as well as niche businesses such as RV dealers that are seeing a spike in demand.
“We continue to see some industries perform very well, including the tech sector with many companies seeing increased demand for their solutions in light of a massive shift to a remote work environment,” says Jim McConnery, a partner Welch LLP, noting that there is also strong performance for many players in residential real estate including builders, brokers, home renovation, landscaping and related services.
“However, many companies are seeing significant pressure on revenue based on covid challenges – this includes significant uncertainty with respect to if and when revenue will bounce back,” McConnery adds.
The Canada Emergency Wage Subsidy program provided an important lifeline to many companies, McConnery says. However, the assumption that this program will not extend into 2021 creates uncertainty for companies that do not expect revenues to rebound.
“This could be a challenging situation for many employees and employers in 2021. There is some optimism that a vaccine will be a key part of our economic recovery, however, we do not know when we will have a vaccine that is widely available – hopefully this is sooner rather than later,” McConnery says.
As a whole, Coletto argues there’s likely a hard road ahead for businesses as the economy recovers.
“It’s a challenging moment and will be challenging for the foreseeable future,” Coletto says.