Drop attributed to waning competition
Business investment per worker has dropped 20% over a 15-year period, according to new research from Statistics Canada.
Data published by the agency revealed that businesses spent $628.80 less for each worker in 2021 compared to 2006.
The reduction was particularly pronounced among larger and medium-sized enterprises, as well as businesses under foreign control.
Additionally, about a third of the overall drop in investment per worker were attributed to a decline in the rate of new business startups in various industries.
Wulong Gu, who authored the study, said this trend reflects the long-held economic theory that competition fosters investment.
The study also observed a shift in investment focus towards intangible assets like brand equity and patents, which are not traditionally recorded as investments by national statistical agencies.
But Gu said this pivot does not fully account for Canada’s lagging investment rates compared to other nations, as similar accounting practices are employed internationally.
Another key finding from the research was the lack of correlation between a company’s profitability and its investment levels, contradicting conventional expectations.
The Competition Bureau of Canada recently released a report highlighting that competition has waned in the past two decades. At the same time, companies reported increasing profits and price markups.
In response, the federal government has initiated amendments to the Competition Act, with changes reflecting recommendations made by the bureau in its report.
Earlier this month, Finance Minister Chrystia Freeland issued a statement calling on CEOs to enhance their investment in business operations.
“We want strong Canadian-headquartered companies in this country,” Freeland said during a press conference. “We need you to be investing in the productive capacity of this country, whatever sector you're in.”
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