Background on the Summit

Business as usual is not an option and neither is complacency. CME is taking the lead to encourage Canadian businesses to define the future of the Canadian economy today. More than 300 business and government decision makers from coast to coast gathered in Ottawa from February 1-2 to chart a course for the Canadian economy into the future.

 
The Impact of Recession

Despite its strong economic fundamentals, the Great Recession has hit the Canadian economy hard. For Canadian manufacturers and exporters, the recession has meant lost customers; layoffs  and even plant closures.

Over the past year:

Sixty-eight per cent of small and medium-sized manufacturers and exporters have cut employment levels - 16 per cent of companies have cut employment by more than 30 per cent.  Only 10 per cent of companies have increased the size of their workforce while 22 per cent are employing around the same number of people today than at the beginning of the recession. 

• Forty-two per cent of companies have reduced capital investments in machinery and equipment, and 20 per cent have cut investment by 30 per cent or more, over the past year;
• Twenty-seven per cent of companies have reduced spending on new product research and development;
• There's a been a 30 per cent evaporation of customer demand in our largest export market.

Current Challenges

As demand begins to pick up, manufacturers and exporters face a number of significant challenges that are constraining their ability to take advantage of the fledgling recovery:

• The rapid appreciation and volatility of the Canadian dollar that acts like a price cut on export sales and makes pricing, purchasing, contracting, hedging activity extremely difficult. 
• Increasing costs for energy and raw materials. 
• The cost and availability of financing. Economic recovery is resulting in new financing challenges for small and medium-sized manufacturers and exporters as higher levels of demand increase production costs at a time when revenues from receivables remain depressed. While more difficult and more expensive to obtain, most companies have secured sufficient working capital to survive the recession. However, new financing lines will be required quickly to allow companies to respond rapidly to newly emerging business opportunities. New financing facilities established by EDC and BDC do not respond rapidly enough to this situation while commercial banks are reticent to extend lines of credit to companies whose P&L and balance sheets have deteriorated significantly over the past year. 
• Increasing protectionism in the US and other countries. 
• Overcapacity in global industrial markets that is depressing prices, accelerating the pace of product commoditization, and leading to consolidation of business operations and supply chains around the world. 
• Consolidation on the part of many multinational companies that has led to the loss of production and product mandates within Canada. Smaller suppliers have counted on larger customers to take their products into world markets. Those supply relations are now breaking down forcing SMEs to seek new customers in new markets, particularly outside the US. 
• Increasing regulatory complexity and unnecessary costs of regulatory compliance. At a time when cash flow is tight, regulatory inefficiencies caused by uncertain, duplicative, or unnecessary regulatory compliance requirements only divert money away from the productive investments in people, technologies, innovation, and new market development that SMEs need to make in order to survive and take advantage of the recovery. 
• Navigating through government assistance programs. Inflexible and time consuming rules and processes place a constraint on the ability of SMEs to manage the recession and respond to recovery. Workshare, for instance, is a very important program that many companies have used to secure their workforce through the worst of recession. As the recovery gets underway, orders are returning sporadically. Workers may be called in to work overtime to fill an order, yet companies may have few or no orders in the pipeline. The requirements of Workshare make it difficult for companies to respond to strengthened demand but remain qualified for the program if orders are not sustained.

The way forward:

Business as usual is not an option for any manufacturer or exporter in today's economy.  In order to compete and grow their businesses, companies must:

• Improve cash flow and financial management;
• Improve internal business and production processes to save money and improve productivity;
• Invest in and adopt new technologies;
• Develop and commercialize new more specialized and more customized products and services;
• Develop new markets and connect to new customers and supply chains;
• Respond more rapidly to changing customer requirements; and,
• Mobilize and train their workforce to achieve new and more profitable business results.

They must do this while complying with a growing array of complex regulatory requirements.  And, they must undertake all of this with the limited resources and expertise that is characteristic of small business.