Prairie SMEs Most Optimistic in Canada About Future Growth

Mississagua, May 05, 2009

Study shows dangerous trend away from global trade, toward domestic economy

Small- and medium-sized enterprises (SMEs) in Canada’s Prairie Provinces are the most optimistic in the country about their business prospects for the coming year, but have taken the dangerous move of shifting their focus away from global markets and are focusing on the domestic economy for the growth of their enterprises.

According to the UPS Business MonitorSM Canada, conducted by TNS Canadian Facts, 59 per cent of Prairie SMEs polled predict their economic position will improve in 2009, while only one per cent foresees a worsening of its position. The numbers are significantly different from data collected in 2007 when 10 per cent of Prairie SMEs predicted a worsening of their economic position.

The results reflect the recent prosperity seen in Manitoba and Saskatchewan, making the Prairies Canada’s new economic “promised land.” However, this recent economic surge has pushed many SMEs away from conducting global trade.

In fact, today only seven per cent of Prairie SMEs sell goods overseas, down from 22 per cent in 2007.

“The trend we’re seeing in the Prairies is a shift in focus from the global to 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 an economic downturn.”

Since 2007, sourcing goods from outside of Canada among Ontario SMEs has jumped from 30 to 40 per cent. 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 per cent to 23 per cent in selling abroad.

“Entrepreneurs in Ontario and Alberta have clearly seen the benefits of conducting overseas trade and are using it to their advantage during these difficult economic times,” said Tierney.

The surge in global trade may be fuelling optimism among Ontario SMEs where only six per cent of respondents predicted their economic position would worsen despite the faltering economy, while almost half (47 per cent) predict it will improve in the near future.

Despite the nationwide impact of the recession, the percentage of SMEs predicting a drop in their workforce has risen only among SMEs in Alberta, Quebec and British Columbia. None of the SMEs polled in the Prairies predicted a decline in their workforce, compared with four per cent in 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 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.