New data shows capital spending still below 2014 levels as CFIB presses Ottawa on small business tax cuts
Canada's business investment problem has not been solved and a flurry of activity this week, from Prime Minister Mark Carney's Wall Street roadshow to new calls for small business tax relief, highlights the scale of the challenge.
A new study from the Fraser Institute, authored by senior fellow Steven Globerman, finds that capital spending on productivity-enhancing assets (machinery and equipment, and intellectual property products such as software) remains below levels recorded in 2014, even as the Carney government has made attracting investment a centrepiece of its economic agenda.
When measured against the size of the overall economy, total business investment as a share of GDP was lower on average from 2022 to 2025 than it was from 2014 to 2021.
Spending on factories, machinery, equipment, and intellectual property fell to just 11.1% of the economy in 2025, down from nearly 14% in 2014. And while some inflation-adjusted measures show modest improvement compared to the years immediately following 2015, none have recovered to the 2014 benchmark — a year the Fraser Institute identifies as the inflection point at which Canada's investment trajectory turned sharply downward.
Canada's labour force expanded by roughly 51% between 2014 and 2025, driven in large part by high immigration. Capital spending failed to keep pace, meaning the average Canadian worker had access to fewer or less up-to-date tools, equipment, and machinery in 2025 than in 2014.
Even intellectual property investment, which has fared better than machinery and equipment on a nominal basis — rising about 33% above its 2014 level by 2025 — still falls short of the growth in employment over that period, leaving real IPP investment per worker lower than it was a decade ago.
"When businesses invest in new factories, new equipment and new machinery, workers become more productive, and when workers are more productive, their standards of living increase," said Globerman. "Unfortunately for Canadians, business investment is still below 2015 levels, which means worker living standards have been stagnating for the past decade."
The Fraser Institute's analysis also highlights Canada's widening gap with the United States. Corporate gross investment as a share of GDP was around 2% higher in Canada than in the US from 2001 to 2014, but flipped to 4.4% lower from 2015 to 2021.
The shortfall is most pronounced in the asset classes most critical to productivity: ICT investment as a share of GDP was roughly 30% lower in Canada than in the US from 2015 to 2021, while intellectual property investment ran nearly 49% lower. The gap had been significant before 2015, but it widened materially after that year. This is not a new problem, but the data make clear it has not been resolved.
Carney pitches in NYC
The findings arrive against the backdrop of an aggressive investment pitch from Ottawa.
Mark Carney wrapped up a visit to New York City on Wednesday, where he addressed the Economic Club of New York and held meetings with top executives, fund managers, and entrepreneurs. The government's goal is to catalyse more than $1 trillion in total investment over five years — in energy, transportation, data, and defence — supported by roughly $280 billion in federal capital commitments designed to draw in public, private, and institutional partners.
"Canada has what the world wants," Carney said. "We're an energy superpower with access to 1.5 billion consumers around the world through our free trade agreements, and we're projected to have the second-fastest growth in the G7 this year and next. Canada's new government is capitalising on these advantages to drive billions in new investment into Canada. These investments will make us a stronger partner to our allies abroad, including the United States, and build a stronger, more prosperous economy for all Canadians."
The government points to genuine competitive strengths: a AAA credit rating, the lowest net debt-to-GDP ratio in the G7, seven of the world's 50 safest banks, and as of May, a ranking as the most attractive market for infrastructure investment globally, according to the Global Infrastructure Investor Association.
Canada also holds 16 free trade agreements covering 51 countries, giving preferential access to roughly 1.5 billion consumers representing two-thirds of global GDP.
Tax cuts
Whether those advantages translate into the structural improvements that economists say are needed is a separate question. The Canadian Federation of Independent Business is making the case that the federal tax framework for small businesses is itself part of the problem and that Ottawa has been conspicuously slow to act while provinces have moved ahead.
Three provinces (Ontario, Quebec, and Newfoundland and Labrador) announced plans this spring to substantially reduce their small business corporate tax rates. Prince Edward Island and Nova Scotia have also cut rates and lifted the income threshold under which those rates apply in recent years. The federal rate, meanwhile, has sat at 9% since 2019.
"Since the last federal small business rate reduction, five provinces have made progress in reducing their corporate tax rates on small businesses," said CFIB president Dan Kelly. "And while the federal rate has been stuck at 9% since 2019, provincial rates now range from 1% to 2.5% in all provinces, other than Manitoba's country-leading rate of 0%."
The CFIB is calling on Ottawa to cut the federal rate to 6% and raise the small business deduction threshold from $500,000 to more than $700,000 — a level the federation argues is the minimum needed just to keep pace with inflation since the threshold was last adjusted. Parliament's industry committee has recommended going further to $1 million, as a productivity measure.
The federation is also pushing back on a common argument used against the small business tax deduction — that it discourages firms from growing past the income ceiling. Its analysis found only about 5,900 businesses have corporate income near the threshold. After adjustments, just 3,900 — or 0.4% of deduction claimants — appear to be curtailing growth because of it, meaning 99.6% of claimants are not limiting their expansion for that reason.
"Investment is weak, costs are rising, and fewer Canadians are starting businesses," said Simon Gaudreault, the CFIB's chief economist and vice-president of research. "That's a clear signal it's time to take a hard look at how competitive Canada's tax system is for entrepreneurs. Instead of picking winners and losers with giant subsidy cheques from Ottawa, government need to look at real data and cut taxes so small firms can succeed."
The Fraser Institute's conclusion is unambiguous: Canada's capital investment and productivity emergency persists regardless of which measure is applied, and substantial increases in spending on assets critical to productivity growth are needed before the country can credibly declare it over.
Carney's New York offensive may attract attention and commitments from global capital markets, but the underlying data suggest the foundations for sustained investment-led growth remain fragile.
