– with additional files from the Canadian Press
A new KPMG survey has found Canada’s small and medium-sized businesses are banking on strong growth in the next three years even as a possible economic downturn remains top of mind in the near term, but that may not be the case in Ottawa.
The national survey of 503 small and medium-sized businesses said 83 per cent are feeling optimistic about their growth over the next few years, with 82 per cent feeling confident about their industry as a whole.
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The optimism comes from companies in the consumer and retail sector, manufacturers, and those in the real estate and construction industries.
Dino Infanti, a tax partner at KPMG in Canada, said the bullish sentiment stems from weathering the pandemic, learning from the experience, and also expectations that a possible recession might be short-lived even though it could cause some pain.
The survey said 61 per cent of small and medium-sized businesses have already taken pre-emptive measures to mitigate recessionary risks, including a short-term freeze on hiring and hitting the pause button on digital transformation plans.
Michelle Groulx, executive director of the Ottawa Coalition of Business Improvement Areas, or OCOBIA, said some of these findings are consistent with what she hears from Ottawa businesses – but not all.
“It’s true that every single business has had two and a half years of worst-case-scenario preparation,” she told OBJ. “When the survey says people have a positive outlook, I do think it’s because they’ve been preparing.”
However, this is where the similarities end, she explained.
“Of course, Ottawa is such a different place than everywhere else in Canada, so I’m interested in where that data comes from,” she said. She said she found the report “surprising” because she is “not seeing bullish, exponential growth anywhere.”
Due to Ottawa’s unique downtown core, which relies on federal employees for its traffic, Groulx said there is still a lot of uncertainty. She is currently involved in the inquiry currently taking place in Ottawa to examine the federal government’s use of the Emergencies Act, which was put into effect to clear the downtown core of the “Freedom Convoy” occupation in February. The event drastically impacted small businesses in the core.
“Two BIAS are speaking and businesses are happy to hear their stories told or their experience shared because it hasn’t been quite conveyed internationally and this was an international level of news,” she said. “They are happy to have their experience told. Their activity in that red zone ceased and that needs to be shared.”
As businesses recover from the pandemic and the impact of the convoy, Groulx said there is at least some optimism.
“There is a level of expectation of revenue growth certainly,” she said. “That’s fantastic because of what they’ve been through.
“I believe that suburban businesses are thriving and they are quite positive,” she added. “But for our inner-core businesses, there is still uncertainty.”
The KPMG survey found that 30 per cent of small to medium-sized businesses have implemented a hiring freeze, with four in 10 mulling plans to do so in the next six months.
Meanwhile, 60 per cent of respondents have paused or expect to pause their digital transformation plans in the next six months in the case of an economic downturn.
“During a downturn, those businesses that have their house in order, are managing costs, watching cash flow and focused on high-margin product lines may be ripe for growth,” KPMG’s Infanti said.
According to the survey, nearly one-quarter of small and medium-sized businesses identified organic growth as the most important strategy to achieve their overall growth objectives, with digital and technology investments ranked second at 18 per cent.
The survey also said 77 per cent of small and medium-sized businesses intend to increase their head count in the next three years to drive their growth plans, with 20 per cent expecting a hiring increase of at least 11 per cent in this period.
However, 56 per cent of small and medium-sized businesses agreed it is difficult to recruit the talent of the future needed to transform their business, making hiring a top challenge over the next few years.
As for Ottawa, Groulx said that “people are looking to recruit, but having difficulty in finding people.”
“At this point in time, with the forecast for recession, people are slowing down on aggressive hiring in preparation,” she explained.
Infanti said even as companies recession-proof their businesses by pulling back, it is crucial to employ or continue with strategies and investments that position for longer-term growth.
“It’s about trying to find that right balance between potentially heading into recessionary times — managing costs and cash flow, putting a pause on digital — but recognizing all of those things are critically important to achieve growth, to continue to eventually invest and reinvest in digital transformation, scale up talent, et cetera,” he said.
Other top risks to growth over the next three years include inflationary pressures, higher interest rates, as well as issues around cybersecurity, the survey said.
The Canadian Federation of Independent Businesses has opposing findings, though, saying that “most provinces have very timid outlooks over the next three to four months.”
CFIB’s monthly Business Barometer for September showed that “Canada’s small business confidence over the short- and long-term declined minimally in September, despite being already at modest levels.”
According to the Barometer, both short- and long-term optimism projections have declined.
These results are much more consistent with what Ottawa is seeing, said Groulx.
“Downtown businesses are less bullish and somewhat waiting for a plan, because they do have uncertainty,”she said. “And inflation is not helping them.”
