Investment Intentions of Canadian Entrepreneurs - An Outlook for 2021 - Study January 2021 - BDC
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Study
January 2021
Investment Intentions
of Canadian
Entrepreneurs
An Outlook for 2021
bdc.ca Investment Intentions of Canadian Entrepreneurs An Outlook for 2021 1
Table of contents
Message from the Chief Economist ..................................................... 3 Author Acknowledgements
................................................................................ 4
Executive summary................................................................................ Pierre-Olivier Bédard-Maltais, This study was made possible
Senior Economist, thanks to the valuable contributions
............................................................................................ 6
Main results............................................................................................ pierre-olivier.bedard-maltais@bdc.ca of Emmanuelle Houle, Louise Girard,
Marco Santos Pires, Isabelle Simard
.......................................................................................... 21
Methodology..........................................................................................
and Samuel St-Pierre.
This report is based on public and proprietary data analyzed and interpreted by BDC.
Any errors or omissions are BDC’s sole responsibility. All numbers in this study have been
rounded. Reliance on and use of the information herein is the reader’s responsibility.
© 2021 Business Development Bank of Canada.
bdc.ca Investment Intentions of Canadian Entrepreneurs An Outlook for 2021 2
Message from the Chief Economist
It’s been a difficult year and we’re happy to The survey indicates entrepreneurs will
be moving on to 2021. The distribution of invest more in technology this year, building
vaccines against the coronavirus brings hope on momentum started in 2020. This is
that the coming year will be better for the great news because technology adoption
economy and for Canadian businesses. enhances productivity and competitiveness
for businesses and the Canadian economy
Each quarter, BDC conducts a Small as a whole. It will also help entrepreneurs
Business Investment Outlook Survey of deal with changes brought on by the
1,000 owners of small and medium-sized pandemic; the rapid rise of online sales and
enterprises (SMEs) in Canada. The objective the growth of remote work being two of the
is to assess their business prospects and most salient examples.
investment intentions for 2021. This report
presents the results of the winter 2021 survey Taken together, the results of this latest
on business investment intentions for the next investment survey paint a picture of an
12 months. economy that will be in a slow but sustained
recovery during the coming year. We would
The results indicate that business investment like to thank the entrepreneurs who took the
intentions are improving, with a growing time to participate in our survey. We hope this
“The results of this latest number of Canadian entrepreneurs planning report will help you plan a successful 2021.
investment survey paint a picture to invest more in 2021 than they did last
of an economy that will be in a year. Indeed, these are the most positive Pierre Cléroux
slow but sustained recovery during results we’ve seen since the beginning of Vice President,
the coming year.” the pandemic. Research and Chief Economist
bdc.ca Investment Intentions of Canadian Entrepreneurs An Outlook for 2021 3
Executive summary
Renewed optimism a disappointing year-end in
improves investment 2019. Investment intentions then
intentions for 2021 collapsed with the first wave of
COVID-19 in the spring, before
Investment intentions are slowly recovering in the summer
expected to remain weak and fall of 2020.
in 2021, but are improving
significantly from last year. This Weak investment intentions
rise in investment intentions reflect a reluctance to invest
is largely due to increased in tangible assets, such as
business confidence and buildings, machinery and
improved sales outlook, equipment, but spending in
according to our new winter intangible assets, such as
2021 survey. software, R&D or employees
training, is gaining momentum.
Net investment intentions
stand at -3, up six points from A desire to improve productivity
last quarter but still down four as well as sales and marketing
points compared to last winter, appear to be the main drivers
when investment intentions of investment, while high
were beginning to recover after uncertainty remains the main
factor holding back investment
bdc.ca Investment Intentions of Canadian Entrepreneurs An Outlook for 2021 4
Executive summary (cont.)
spending in 2021, although to confidence. High indebtedness, Sectoral and regional > Quebec and Atlantic Canada
a lesser extent than in previous weak demand, additional outlook have the most buoyant
quarters. containment measures and news investment intentions overall,
of a virus mutation could dampen > Companies in the resources with positive outlooks in both
A new hope this renewed optimism. sector are showing a strong regions.
recovery in their investment
With the U.S. election behind Capacity pressure intentions for the coming year. > Net spending intentions
us and the hope offered by and hiring difficulties remain weak in all other
coronavirus vaccines, this winter’s > The situation is deteriorating regions.
are building up
survey reveals that the mood for wholesalers and
of entrepreneurs has improved Half of entrepreneurs said it technology companies.
significantly. We now find as would be difficult to either hire
many optimistic as pessimistic new skilled employees or meet an > The resources sector faces
entrepreneurs, a marked unexpected increase in demand significant capacity and
improvement from the previous because they are operating at or productivity challenges as
quarter, when more than half above full capacity. While capacity commodity prices recover.
of entrepreneurs thought the and labour shortage issues have
economy would deteriorate over > Spending in the technology
not yet become a major barrier to
the next months. This signals that sector is expected to return
investment in much of the country,
a slow but sustained recovery is to normal after an exceptional
we expect these issues to grow in
underway. However, there is still year in 2020.
importance as the economy gears
a long way to go before we see a up in 2021.
marked improvement in business
bdc.ca Investment Intentions of Canadian Entrepreneurs An Outlook for 2021 5
Main
results
bdc.ca Investment Intentions of Canadian Entrepreneurs An Outlook for 2021 6Main results
Business confidence Figure 1: Net business confidence
When you think about the next 12 months, how confident are you about the economic conditions in Canada?
Our winter 2021 survey shows that
entrepreneurs are gradually regaining Balance of opinion* Expect better conditions Expect worse conditions
confidence in the Canadian economy. 80%
Net business confidence is close to zero
at -1, a jump of 34 percentage points 60%
from the fall 2020 survey. We now find
40%
as many optimistic (35%) as pessimistic
(36%) business owners, a marked 20%
improvement from previous quarters, +1
0
when more than half of entrepreneurs -1
-7 -7
expected the economy to deteriorate -20%
over the next 12 months.
-37 -35 -40%
Entrepreneurs in the Prairies (43%) were -60%
the most likely to expect worse economic -60
conditions in 2021. -80%
Q3 Q4 Q1 Q2 Q3 Q4 Q1
2019 2020 2021
Net business confidence by region in Q1 2021:
– B.C. and the North (+13)
– Prairies (-11)
– Ontario (-10)
– Quebec (+14)
– Atlantic (-2)
*The balance of opinion (blue bar) is the difference between the percentage of entrepreneurs expecting better conditions (blue line) and the percentage expecting worse conditions (red line).
bdc.ca Investment Intentions of Canadian Entrepreneurs An Outlook for 2021 7Main results
Sales outlook Figure 2: Net future sales expectations
Over the next 12 months, do you expect your company’s total sales or revenue to increase, remain the same
Future sales expectations are gaining
or decrease compared to the last 12 months?
momentum. For the first time since the
beginning of the recession last spring, Balance of opinion* Expect sales to increase Expect sales to decrease
there are more entrepreneurs who 80%
expect sales to increase than decrease
in the next 12 months (38% vs. 25%, 60%
respectively). +36 +37
+33 40%
Large companies (55% expect an +12 20%
increase) were the most likely to expect
higher sales, while companies in the 0
Prairies (33% expect a decrease), were -10
-20%
the most likely to expect lower sales. -20
-40%
-49
-60%
-80%
Q3 Q4 Q1 Q2 Q3 Q4 Q1
2019 2020 2021
Net future sales expectations by region in Q1 2021:
– B.-C. and the North (+12)
– Prairies (-3)
– Ontario (+8)
– Quebec (+34)
– Atlantic (+17)
* The balance of opinion (blue bar) is the difference between the % expecting sales to increase (blue line) and the % expecting sales to decrease (red line).
bdc.ca Investment Intentions of Canadian Entrepreneurs An Outlook for 2021 8Main results
Hiring outlook Figure 3: Net hiring intention
Over the next 12 months, do you expect your company’s number of employees to increase, remain the same
Net hiring intention has improved but or decrease compared to the last 12 months?
remains negative. This suggests that while
a strong labour market recovery is unlikely, Balance of opinion* Expect headcount to increase Expect headcount to decrease
further massive layoffs are not expected. 80%
Large companies (29%), companies 60%
in Quebec (32%) and those in the
40%
resources sector (57%) were more likely
to expect headcount to increase. +11
+19 +16
20%
0
-2
-10 -11
-20%
-27
-40%
-60%
-80%
Q3 Q4 Q1 Q2 Q3 Q4 Q1
2019 2020 2021
Net hiring intentions per region in Q1 2021:
– B.C. and North (-5)
– Prairies (-13)
– Ontario (-3)
– Quebec (+14)
– Atlantic (0)
*The balance of opinion (blue bar) is the difference between the percentage of entrepreneurs expecting headcount to increase (blue line) and the percentage expecting headcount to decrease (red line).
bdc.ca Investment Intentions of Canadian Entrepreneurs An Outlook for 2021 9Main results
Who will be hiring
in 2021?
Net hiring intention by business size
Small businesses Medium businesses Large businesses
(Less than $2 million ($2 to $10 million (Over $10 million
-3 +1 +14
in annual revenue) in annual revenue) in annual revenue)
12 percentage points* 2 percentage points** 1 percentage point
* All comparisons are with the previous quarter unless otherwise noted.
** A percentage point is the difference between two percentages. For example, moving up from 10% to 15% is a 5 percentage-point increase.
bdc.ca Investment Intentions of Canadian Entrepreneurs An Outlook for 2021 10Main results
Capacity pressure Figure 4: Capacity pressure Figure 5: Hiring difficulties
How would you assess your company’s current ability to meet How would you assess your
Our winter 2021 survey reveals that an unexpected increase in demand or sales? company's current ability to hire
capacity pressure is building up. Half qualified workers?
of companies said it would be difficult Significant difficulties, we are operating beyond capacity
to meet an unexpected increase in Some difficulties, we are or near full capacity Significant difficulties, we are missing workers to
operate or seize new opportunities
demand as they are now operating Some difficulties, but the situation is not critical
at or beyond capacity. This is likely
due to capacity problems created
by lockdowns and other sanitary
50%
measures. 19
5 11 10 15
4 40%
41
Labour shortages are also starting 6
36 9 38 39
14
38
35 12 35
to increase, with 54% of business 32
30%
leaders reporting some or significant 27 28
20%
difficulties recruiting skilled
employees. 10%
Medium (70%) and large (72%) Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q3 Q4 Q1
0
companies as well as companies in 2019 2020 2021 2020 2021
Quebec (67%) were more likely to
face hiring difficulties. Capacity pressure per region in Q1 2021: Hiring difficulties per region in Q1 2021:
– B.C. and North (43%) – B.C. and North (48%)
– Prairies (36%) – Prairies (50%)
– Ontario (49%) – Ontario (50%)
– Quebec (65%) – Quebec (67%)
– Atlantic (53%) – Atlantic (57%)
bdc.ca Investment Intentions of Canadian Entrepreneurs An Outlook for 2021 11Main results
Investment outlook Figure 6: Net investment intentions
Over the next 12 months, what do you expect your company’s investment spending to be compared
Investment intentions have improved to the last 12 months?
from last spring but still remain weak in
2021. The number of business leaders Balance of opinion* Expect to spend more Expect to spend less
who plan to reduce spending over the 50%
next 12 months (24%) continues to offset
40%
those who plan to spend more (21%).
30%
The year 2020 had started on a positive
note, with net investment intentions 20%
beginning to recover after a sluggish year- 10%
end in 2019. Investment intentions then +1
collapsed in the spring of 2020 before 0
-2 -1
improving in the following quarters. It now -3
-10%
stands at -3, an increase of 6 percentage -10
-9
points from the fall of 2020. -20%
-30%
-32
-40%
Q3 Q4 Q1 Q2 Q3 Q4 Q1
2019 2020 2021
*The balance of opinion (blue bar) is the difference between the % expecting to spend more (blue line) and the % expecting to spend less (red line).
bdc.ca Investment Intentions of Canadian Entrepreneurs An Outlook for 2021 12Main results
Main factors driving Figure 7: Factors driving business investment Figure 8: Factors limiting business investment
investment decisions Which of the following best describes your main Which of the following factors are most likely to limit
business investment goals for the next 12 months? your investment spending in the next 12 months?
A desire to increase productivity as
well as sales and marketing are the 2021 Q1 2020 Q4 2020 Q1 2021 Q1 2020 Q4 2020 Q1
main drivers of investment intentions
12 % 12 %
for the next 12 months. We also see Reduce environmental
footprint 9%
Nothing will limit
your investments 9%
a growing proportion of business 9% 10 %
leaders mention the need to replace 20 % 11 %
Unfavourable exchange rate 8%
and add new capacity, or reduce Add new capacity 19 %
15 %
9%
their environmental footprint, when 7%
14 %
explaining their investment goals. Replace existing capacity 13 %
Low prices 9%
9%
9%
By far the most significant barrier to 19 % High economic incertainty
39 %
49 %
investment remains the high level of Expand into new markets 20 % 30 %
23 %
economic uncertainty, although this 14 %
Difficulty obtaining
impediment has decreased since fall Introduce new products
26 % financing 11 %
23 % 10 %
2020. Lack of money to invest and or services
21 %
26 %
low demand are the two other most 46 % Low cash flow position 22 %
common factors that limit business Become more efficient
or productive
47 % 28 %
investment. 40 % 8%
Insufficient capacity 8%
38 %
12 %
Improve sales and marketing 39 %
35 % 14 %
Lack of qualified employees 13 %
26 % 19 %
Adopt new technologies 23 %
22 % 20 %
Low demand 29 %
Percentage of companies 21 %
Percentage of companies
bdc.ca Investment Intentions of Canadian Entrepreneurs An Outlook for 2021 13Investment
Figure 9: Net investment intentions—non-residential buildings
and renovations
Over the next 12 months, what do you expect your company’s investment
outlook by asset
spending to be compared to the last 12 months?
Balance of opinion* Expect to spend more Expect to spend less
categories 80%
60%
40%
Low investment intentions reflect a reluctance
20%
to invest in tangible assets, such as buildings
and machinery and equipment, but spending in 0
intangible assets is gaining momentum. -10 -10 -7 -10
-16 -17 -20%
-35
-40%
-60%
-80%
Q3 Q4 Q1 Q2 Q3 Q4 Q1
2019 2020 2021
*The balance of opinion (blue bar) is the difference between the % expecting to spend more (blue line) and the % expecting to spend less (red line).
bdc.ca Investment Intentions of Canadian Entrepreneurs An Outlook for 2021 14Investment outlook by asset categories
Figure 10: Net investment intentions—machinery and equipment Figure 11: Net investment intentions—software, IP protection, R&D,
marketing and employee training
Over the next 12 months, what do you expect your company’s investment
spending to be compared to the last 12 months? Over the next 12 months, what do you expect your company’s investment
spending to be compared to the last 12 months?
Balance of opinion* Expect to spend more Expect to spend less Balance of opinion* Expect to spend more Expect to spend less
80 % 80%
60 % 60%
40 % 40%
20 % +16 20%
+12
+8 +9
+2
0 0
-4 -3 -2 -4 -1
-6 -8
-20 % -20%
-20
-34
-40 % -40%
-60 % -60%
-80 % -80%
Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q3 Q4 Q1 Q2 Q3 Q4 Q1
2019 2020 2021 2019 2020 2021
*The balance of opinion (blue bar) is the difference between the % expecting to spend more (blue line) and the % expecting to spend less (red line).
bdc.ca Investment Intentions of Canadian Entrepreneurs An Outlook for 2021 15Investment outlook by asset categories
What investments are
entrepreneurs planning
for 2021?
35% 46% 53%
Percentage of businesses
with investment intentions
in 2021
will invest in non- will invest in machinery will invest in intangible
residential buildings and equipment assets*
and renovations
*Assets with no physical form, such as software,
marketing initiatives, training and intellectual property.
bdc.ca Investment Intentions of Canadian Entrepreneurs An Outlook for 2021 16Investment
Figure 12: Net investment intentions—B.C. and North
Over the next 12 months, what do you expect your company’s investment
spending to be compared to the last 12 months?
outlook by region Balance of opinion* Expect to spend more Expect to spend less
80%
60%
Investment intentions are gaining momentum in
40%
Quebec and the Atlantic region. In Quebec, strong
business confidence and capacity pressures will 20%
drive entrepreneurs to spend more, while business +6
0
owners in the Atlantic region will invest to improve -7 -7 -3
-8
sales and marketing. -13 -20%
While intentions are improving in other provinces, -36
-40%
net intentions remain negative, mainly due to high
-60%
economic uncertainty. Business owners in the
Prairies are also more likely to reduce spending due -80%
to lack of cash flow and low prices for their products Q3 Q4 Q1 Q2 Q3 Q4 Q1
2019 2020 2021
and services.
*The balance of opinion (blue bar) is the difference between the % expecting to spend more (blue line) and the % expecting to spend less (red line).
bdc.ca Investment Intentions of Canadian Entrepreneurs An Outlook for 2021 17Investment outlook by region
Figure 13: Net investment intentions—Prairies Figure 14: Net investment intentions—Ontario
Over the next 12 months, what do you expect your company’s investment Over the next 12 months, what do you expect your company’s investment
spending to be compared to the last 12 months? spending to be compared to the last 12 months?
Balance of opinion* Expect to spend more Expect to spend less Balance of opinion* Expect to spend more Expect to spend less
80% 80%
60% 60%
40% 40%
20% 20%
+6
+3
0 0
-3 -1 -4
-6 -8
-14 -13 -10 -13
-15 -20% -20%
-30
-37 -40% -40%
-60% -60%
-80% -80%
Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q3 Q4 Q1 Q2 Q3 Q4 Q1
2019 2020 2021 2019 2020 2021
*The balance of opinion (blue bar) is the difference between the % expecting to spend more (blue line) and the % expecting to spend less (red line).
bdc.ca Investment Intentions of Canadian Entrepreneurs An Outlook for 2021 18Investment outlook by region
Figure 15: Net investment intentions—Quebec Figure 16: Net investment intentions—Atlantic
Over the next 12 months, what do you expect your company’s investment Over the next 12 months, what do you expect your company’s investment
spending to be compared to the last 12 months? spending to be compared to the last 12 months?
Balance of opinion* Expect to spend more Expect to spend less Balance of opinion* Expect to spend more Expect to spend less
80% 80%
60% 60%
40% 40%
20% 20%
+6 +7 +9
+1 +4 +1 +1
0 0
-1 -3 -2
-9 -10
-20% -20%
-25
-40% -34 -40%
-60% -60%
-80% -80%
Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q3 Q4 Q1 Q2 Q3 Q4 Q1
2019 2020 2021 2019 2020 2021
*The balance of opinion (blue bar) is the difference between the % expecting to spend more (blue line) and the % expecting to spend less (red line).
bdc.ca Investment Intentions of Canadian Entrepreneurs An Outlook for 2021 19Investment outlook by business sector
Figure 17: Net investment intentions and trends by business sector Investment outlook by In contrast, technology
Over the next 12 months, what do you expect your company’s investment business sector companies expect investments
spending to be compared to the last 12 months? to decline the most. The
50,0 Despite overall weak spending decline could reflect a return
Recovering Gaining momentum intentions, some sectors have to normal since the demand for
(negative and increasing) (negative and increasing) Resources better investment outlooks than technology solutions boomed
40,0 others. during the pandemic. This pace
could hardly be maintained in
Companies in the resources 2021. The decline might also
sector stand out as having the reflect the trend toward remote
Change in percentage points from last quarter
30,0
most favourable investment work, especially strong in the
outlook. Rising prices for many technology sector, which is
20,0
commodities (e.g., oil, mineral, reducing the need to invest in
lumber) and the need to add new office space.
Construction
Exporter capacity while remaining efficient
is fuelling investment in new
Manufacturing 10,0
machinery and equipment.
All Businesses
Services Non-exporter Exporters and construction
-10 0 10 20 30 40 50 60
companies expect to spend
-30 -20
Retail more in intangibles; the former to
Wholesale improve their sales and marketing
-10,0 and the latter to become more
Technology productive.
Deterioring Slowing
(negative and decreasing) (positive and decreasing)
-20,0
Net investment intention (balance of opinion*)
*Businessses are categorized according to their net investment intentions (positive or negative) and the trend in investment intentions (increasing or
declining) according to company characteristics.
bdc.ca Investment Intentions of Canadian Entrepreneurs An Outlook for 2021 20Data and methodology
Survey on investment intentions Canadian small and medium- Date of surveys > Summer 2020: July 6 to July 17,
of small and mid-sized sized businesses. Excluded from 2020. A total of 1,002 business
businesses the sample were self-employed > Summer 2019: July 12 to owners completed the survey.
workers, companies with 500 July 22, 2019. A total of 1,022
Since July 2019, Delvinia conducts or more employees, and those business owners completed > Fall 2020: September 24
a quarterly online survey of operating in the utility, education, the survey. to October 7, 2020. A total
approximately 1,000 business health care, social assistance and of 1,000 business owners
owners and decision makers on public administration sectors. > Fall 2019: October 1 to completed the survey.
its AskingCanadians panel. October 17, 2019. A total
Online surveys cannot have a of 1,000 business owners > Winter 2021: December 3 to
To ensure enough data are margin of error since they are completed the survey. December 18, 2020. A total
collected at the regional level, not probabilistic. For comparison of 1,001 business owners
by sector and business size, the purposes, a probability sample > Winter 2020: January 15 completed the survey.
Atlantic region, the manufacturing of this size would carry a margin to February 7, 2020. A total
sector, and the medium-sized of error of ±3.1 percent points, 19 of 1,058 business owners
and large businesses segments times out of 20. completed the survey.
were oversampled. The results
were weighted by region, sector > Spring 2020: April 7 to April
and size of business to ensure 16, 2020. A total of 1,000
findings were representative of business owners completed
the survey.
bdc.ca Investment Intentions of Canadian Entrepreneurs An Outlook for 2021 21Data and methodology
What do we consider
business investment?
Business investment, or Tangible assets are the machinery, Business investment excludes the purchase
investment spending, is money a equipment and materials workers use of shares, bonds and other securities. It also
business spends to buy tangible in their jobs, and the buildings where excludes residential investments and everyday
production takes place. expenditures, such as fees for maintenance,
or intangible assets. repairs or the day-to-day operations of
Intangible assets are non-physical the business.
things—such as software, intellectual
property protection, research and
development, and marketing—that
businesses depend on to prosper in a
modern economy. Intangible assets also
include investments in employee training.
bdc.ca Investment Intentions of Canadian Entrepreneurs An Outlook for 2021 22Data and methodology
Calculation of the
balance of opinion
This report looks at various A positive balance means more The balance of opinion can vary between +100 and -100.
investment outlook indicators, respondents have a positive Percentages may not add to 100 because of rounding.
such as Canadian entrepreneurs’ opinion on a given subject than
level of confidence in the economy, a negative opinion. A balance
their business and hiring outlooks,
and their investment plans over
moving up sends a signal that the
indicator is improving, while
Balance of opinion
= % having a
positive opinion - % having a
negative opinion
the next 12 months. Results are a balance moving down means
presented as a balance of opinion it is declining.
and are representative of Canadian
small and medium-sized businesses. All survey results were weighted
by regions, sectors and size of
Balance of opinion is the businesses.
difference between the proportion
of businesses that have a positive
and negative opinions. Businesses
that have a neutral opinion are
excluded from the calculation.
bdc.ca Investment Intentions of Canadian Entrepreneurs An Outlook for 2021 23Start planning your investments
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