CALGARY – A new survey shows small and medium-sized businesses in Alberta will slash spending more than expected this year as the oil downturn hits every level of the province’s economy.
The government-owned Business Development Bank of Canada says smaller businesses in the province plan to invest about $11 billion this year, 27 per cent less than last year.
That compares with a 14 per cent increase in planned spending in British Columbia, and either flat or modest growth in spending across the rest of Canada.
BDC chief economist Pierre Cleroux says he expected spending to go down in Alberta, but was “surprised by the magnitude of the drop.”
The BDC survey heard from roughly 4,000 executives of companies across Canada with between one and 499 employees.
Cleroux said this year will be worse than last year as the reality of low oil prices fully sinks in, with 66 per cent of survey respondents in Alberta saying a lack of confidence in the economy was their main barrier to investing.
“Last year was the first year (of the downturn in oil prices) and a lot of people thought that the oil price would come back quickly,” Cleroux said. “I think people are getting used to this new reality.”
RefineCo Inc., a business-focused tech firm in Calgary, is one of the many companies being more careful about spending, says company CEO Eric Veenendaal.
“On the capital side, I would say we are certainly being cautious,” Veenendaal said. “As a professional IT services company, we are largely at the will of what clients are doing in terms of their own capital spending.”
That spending in the oil and gas sector has dropped considerably, forcing RefineCo to look elsewhere for contracts in sectors such as agriculture and the government.
Two years ago, RefineCo relied on oil and gas for 60 to 70 per cent of its work but now it’s less than 10 per cent, and Veenendaal isn’t betting on any short-term bounce in oil.
“Our plans extending out three years down the road basically don’t account for any kind of a spike,” Veenendaal said.
The Village Brewery in Calgary is growing well, but co-founder Jim Button says it’s still feeling the headwinds of the downturn.
“You used to be able to say beer is recession-proof, but I think “recession-resistant” is the word they’ve come up with in the last bunch of years,” Button said.
The restaurants he supplies have seen overall sales drop by 20 to 30 per cent, cutting into Button’s own sales growth. That’s been partially offset by people drinking more at home, boosting retail sales, he said.
The company is still going ahead with about $750,000 in capital investments this year to boost efficiencies and quality, but that’s down from earlier plans. The company also won’t be able to do as much with that money because the equipment it needs is priced in U.S. dollars, and there are no plans to hire more staff, said Button.