B. C. SMEs Retreat from Global Trade

Mississagua, May 05, 2009

Pacific province falls from highest level of international selling in Canada to third lowest

Global trade activity among  small- and medium-sized enterprises (SMEs) in British Columbia plummeted significantly between 2007 and 2008, moving the Pacific province’s standing from the highest level of global trade in Canada to the third lowest.

According to the UPS Business MonitorSM Canada, conducted by TNS Canadian Facts, the number of B.C. SMEs selling goods overseas dropped from 22 per cent in 2007 to only 16 per cent in 2008, putting it ahead of only the Prairie provinces and Atlantic Canada. The number of SMEs sourcing goods from overseas also dropped from 34 per cent in 2007 to 30 per cent in 2008.

“The trend we’re seeing in B.C. is a shift in focus from the global to the domestic economy, which is the polar opposite of what SMEs in other provinces, such as Alberta and Ontario, are doing,” said UPS Canada President Mike Tierney. “It’s important to remember that global trade is an inevitable and crucial part of sustaining a well-rounded successful business. Maintaining overseas partners during good times and bad will ensure consistency in business growth while protecting against the effects of economic downturn.”

Conversely, sourcing goods from outside of Canada among Ontario SMEs jumped from 30 per cent in 2007 to 40 per cent in 2008. Meanwhile, Alberta — where SMEs had the lowest level of global trade in Canada in 2007 — saw an increase in sourcing from abroad, from six per cent in 2007 to 39 per cent in 2008, and an increase from eight to 23 per cent in selling abroad.

The surge in global trade may be fuelling optimism among Ontario SMEs where only six per cent of respondents predicted a decline in business despite the faltering economy while almost half (47 per cent) predict growth in their near future. Optimism in Alberta is similarly high with only nine per cent of SMEs predicting a worsening of their economic position and 49 per cent predicting an improvement. However, Alberta’s numbers have changed significantly since 2007 when zero SMEs foresaw a worsening of their economic position and 79 per cent predicted an improvement.

Though predictions of business growth or decline have remained unchanged in B.C. between 2007 and 2008, the number of SMEs in the province predicting a decline in their workforce has risen from zero in 2007 to seven per cent in 2008. Outside of B.C., only SMEs in Alberta and Quebec predicted a greater drop in their workforce in 2008 over 2007.

The United States remains the primary target for sourcing and selling goods outside of Canada among all businesses.  However, Canadian SMEs conducting global trade have begun to diversify geographically, targeting global markets in Asia, Europe and South America.

“We’re beginning to see the impact of the economic downturn in the U.S. in global trade trends,” said Tierney. “Businesses here are beginning to realize the wealth of opportunities outside of the NAFTA comfort zone and are taking advantage of them as a means of weathering the economic storm.”

SMEs in Quebec remain leery of global trade with 10 per cent citing it as being detrimental and 58 per cent (the highest in Canada) preferring to maintain trade restrictions.

Despite the recent economic decline in Alberta fuelled by the drop in the energy sector, the Rocky Mountain province remains the top choice for SMEs in Canada to establish a new location for their business outside of their home province, followed by B.C. and the Prairies.

The UPS Business Monitor Canadasurvey was conducted by TNS Canadian Facts between November 12 and December 3, 2008, and surveyed a total of 505 SMEs across the country. The entire study has a margin of error +/- 4.4 per cent.