SMEs forecast to give way to larger firms in job growth

SMEs forecast to give way to larger firms in job growth

SMEs forecast to give way to larger firms in job growth A recent global economics special report from Scotiabank has shown that the Canadian economy has been going through sub-par employment growth since its 2009 cycle low, but it has been cushioned somewhat by decent annual payroll growth among small firms – those with fewer than 100 employees. Over the period of 2010-2015, small firms generated more than 500,000 net new jobs, accounting for 45% of payroll gains.

Small and medium enterprises (SMEs) were reported to account for around 25% of Canadian exports and 25% of shipments to the rest of the world in 2014, with the latter being focused on Asia including China, Europe, and Central/South America and the Caribbean. As demand from several external markets, including the US, is expected to improve, small businesses have an opportunity to take advantage.

And they may not have much choice, with a possible rebalancing in job growth towards larger firms being anticipated. Resource sector investment is forecast to stabilize next year as a modest firming in commodity prices occurs, while the same strengthening demand from the US is expected to favor large-scale Canadian manufacturing and export activity. Gains in domestic spending and housing activity, meanwhile, are expected to be muted due to ongoing adjustments to past plunges in oil prices, record-setting household debt burdens, and lackluster performance in non-commodity exports.

Small businesses that wish to expand into foreign markets will face significant challenges. Aside from possibly having to compete against entrenched large-scale Canadian exporters, populist and protectionist policy prescriptions expressed during the US presidential campaign have tended to undermine US business confidence and investment, reinforcing the country’s sluggish overall performance. A lingering slowdown in Chinese growth has also helped oversupply commodity markets and reduced resource prices in recent years.

“In this environment, Canadian firms will need to increase their productivity-enhancing investments in order to meet the growing competitive challenge from around the world,” the report concluded.

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