Canada’s economic health depends largely on the small business sector, according to a new report.
Small business accounted for 75 per cent of total employment growth in Canada over the last year, says the recently released CIBC report, Small Business Today and Tomorrow.
“The recent economic recovery saw an impressive rebound in small-business activity that, in the first half of 2002, was growing at an estimated annualized rate of 5.7 per cent – notably higher than the rate in the economy as a whole,” said Benjamin Tal, CIBC senior economist.
“While overall economic activity in the coming six months is expected to be somewhat slower than the pace at the start of the year, small businesses in industries that benefit from consumer spending will see the strongest growth,” Tal added.
Rapid change will present the greatest challenge for small business in the future, says the report, with globalization, the Internet, demographics, immigration and a shortage of skilled labour the major drivers of this change.
“One of the defining characteristics of our entrepreneurs – the ability to transform and reinvent their businesses as their skills grow and markets change – will become even more important to a firm’s success,” said Tal.
In the short term, low interest rates, healthy consumer spending and further outsourcing activity by large firms will support relatively strong Canadian small-business activity in the coming 12 months, the report says.
The report says small-business activity in Alberta is projected to remain strong in 2003, with high oil prices and strong manufacturing activity providing positive spinoffs to the small business sector.
The report projects that the relatively low rate of exports by small businesses will rise as they increasingly see foreign markets and foreign sources of supply as important to their growth and success.
The Internet and the growth in the number of self-employed immigrants will speed the increase in small-business exports.
However, the report cautions that small businesses in Canada must learn to deal with the increased complexity of managing foreign-exchange risk as well as trade, tax and other regulations in the countries they are trading with.
The Internet will also help growth in small-business activity with its ability to facilitate connectivity, new forms of collaboration and the virtual enterprise.
At the same time, the report says, the shrinking labour force may become the chief factor limiting small-business growth in the next decade.
Small firms, already facing a shortage of 200,000 to 300,000 workers, will find it increasingly difficult to obtain qualified labour.
To overcome this difficulty, small firms will have to increase training of their existing labour force, hire a greater number of older workers and create more family-oriented work policies for married employees.
