KPMG survey finds 54% of companies cut R&D and capital spending amid tariff-driven uncertainty
More than half of Canadian companies have already cut investment, research and development (R&D), or capital expenditures for the next 12 months due to US-instigated global trade tensions, according to a new KPMG in Canada survey.
Fifty-seven percent say they plan further reductions, while 54 percent have lowered profit outlooks and 58 percent downgraded sales forecasts.
The economic pressure has prompted 66 percent of business leaders to say that long-term planning has become increasingly difficult.
As a result, 52 percent have increased prices to customers and 63 percent intend to raise them further.
Hiring has also been affected: 38 percent report employee layoffs linked to trade uncertainty and tariffs, while 49 percent froze hiring and 46 percent are considering further workforce reductions.
Despite these challenges, 75 percent of Canadian business leaders report their companies are investing as much or more in technology, machinery, equipment, and intellectual property compared to US and global peers.
But the same firms say American tariffs are strangling revenue and disrupting future investments.
According to the KPMG findings, 92 percent agree that Canadian companies must accelerate technology and innovation investment to build a more resilient economy.
Yet 59 percent say the current economic environment prevents them from investing in the kind of technologies that would enhance productivity.
Benjie Thomas, chief executive officer and senior partner at KPMG in Canada, said the data “reflect a more ambitious mindset within Canadian business, but they also acutely underscore the difficulties our economy faces right now.”
Thomas said governments must “act with urgency” and avoid “complacency” in tax reform, eliminating interprovincial trade barriers, improving capital access, and investing in infrastructure.
A parallel KPMG International survey found large Canadian firms are outspending global peers, but many of these tech investments are still in early stages after a prolonged period of undercapitalization.
Still, 75 percent of companies say digitization efforts have delivered expected returns, and another 75 percent report artificial intelligence investments have boosted productivity by 10 percent or more—37 percent say gains exceeded 20 percent.
Thomas warned: “There is a big risk that these investments will be stranded if companies don’t have the capital to continue to invest.”
With 76 percent of businesses preparing for a Canadian recession, many are pressing government for immediate actions.
Their top priorities include eliminating interprovincial trade barriers and harmonising regulations (64 percent), undertaking a comprehensive tax review (58 percent), and expediting approvals for major infrastructure and resource projects (56 percent).
Eighty-two percent believe removing internal trade barriers would improve company efficiency and productivity.
The 'Buy Canada' movement has also gained traction: 77 percent say it has helped boost sales, 87 percent say it has refocused their companies on the Canadian market, and 84 percent hope it “doesn’t fizzle out” given the ongoing uncertainty with the US.
Amid weakening confidence in US market reliability, 75 percent of respondents say they no longer see the US as dependable, while 79 percent are actively diversifying export strategies.
Over two-thirds (68 percent) are investing in marketing and forming new international relationships. Regardless of how US trade policy evolves, 90 percent say they will continue to diversify globally.
“Pivoting their sales strategies will take time, and two-thirds are already struggling to make long-term plans given the ongoing economic uncertainty,” said Monika Manza, Canadian managing partner, Advisory Services at KPMG in Canada.
She said businesses “need certainty” and are depending on governments for decisive action to “drive growth.”
Manza added that businesses want to grow within Canada and are looking to governments for leadership to break down internal trade barriers, restore tax competitiveness, improve access to capital, and move quickly on resource projects that could unlock long-term value.
| KPMG surveyed 250 Canadian business leaders from companies earning over $10m annually between May 9 and 20, using Methodify's platform. Of those surveyed, 52 percent lead privately held firms, 28 percent are private equity–owned, and 18 percent head publicly traded Canadian companies. |
