The past year and a half has seen trying times for many businesses across all industries. Companies have been forced to drastically cut costs to stay alive, and many are dependent on the outcome of the upcoming Federal Budget to further ensure their survival. We have seen some positives in the economy that indicate a recovery is on the way: January 2010 marks the fourth employment gain in the past 6 months with the unemployment rate at 8.3%; CMCH (Canadian Mortgage and Housing Corporation) forecasts that the housing starts for 2010 will be 180,000 units which is up from 149,000 units in 2009; and the Bank of Canada anticipates that the interest rates will rise Q3 2010. Although Canada is in a great position for recovery and we were far less impacted by the recession than any other country in the world, we do expect that it’s going to take some time to turn around yet. Many industries are hopeful that the when the Federal Budget is announced this Thursday, March 4th it will bring them some relief in the form of tax breaks. Let’s take a look at how our biggest industries have been affected during the recession and what they are asking for.

Canadian Manufacturers

  • More than 239,000 jobs lost in 2009
  • Sales of Canadian produced goods fell from monthly peak average of $54B mid 2008 to a low of $34B mid 2009 (consumers stopped buying, foreigners stopped importing, and banks stopped lending in 2009)
  • According to Canadian Manufacturers and Exporters (CME) foreign merchandise sales from August 2008 to August 2009 fell 31.6%
  • Canadian manufacturers want Ottawa to start cutting the deficit and national debt without boosting taxes
  • Also asking for tax changes to allow money spent on employee training to be applied towards reducing company’s EI premiums

Lumber and Pulp-and-Paper

  • Rising Canadian dollar negatively impacted the industry’s exports
  • US housing starts dropped 38% in 2009 (National Association of Realtors)
  • Softwood lumber shipments down 21% and Pulp-and-Paper down 18% during first 11 months of 2009 compared to same period in 2008
  • Canadian log cutters looking to emphasize new products rather than new markets
  • Asking Ottawa for a switch to production of bio-fuel and bio-products through tax incentives and a made-in Canada energy policy that will enable them to better tap into the fast expanding green market

Information Technology

  • The IT sector was hit far less than other industries – PC shipments down 2% in 2009 (source: Gartner)
  • Gartner predicts that PC shipments will increase by 12.6% in 2010
  • The Information Technology Association of Canada (ITAC) is asking the federal government to stick to their plan of expanding the country’s broadband network
  • Also want to extend 2011 deadline to end favourable tax treatment of computers and software (temporary 100-per-cent capital cost allowance (CCA) rate for computers acquired after January 27, 2009 and before February 1, 2011)

Oil and Gas

  • At 2008 peak, barrel of Brent oil from North Sea cost $144.95 US and that same barrel went for $38.12 US a year later
  • US Energy Information Administration predicts that a barrel of West Texas Intermediate crude (average price of $61.66 US/barrel in 2009) will be $79.78 in 2010 and should rise to $83.50 in 2011
  • Canadian Association of Petroleum Producers (CAPP), which measures oil activity in terms of capital spending forecasts that members will invest $40B in exploration and production in 2010 compared to $34B that the same companies spent in 2009
  • CAPP asking Ottawa to allow oil drillers to write off 100% of exploration costs in the first year (to delay phase-out of accelerated tax write-off treatment for oil sands development costs) and to expand existing scientific tax credits

Banks

  • In 2008, the top 8 Canadian banks earned $474B which is a drop of 35% or $25B from a year earlier but saw a gain of 33% for the 3-month period ending October 31,2009
  • Canada avoided most of the turmoil because our major banks weren’t huge buyers or sellers of exotic debt instruments
  • Bankers want to see Ottawa stick to their current plan of cutting corporate income tax to 15% by 2012 and to implement recommendations that came from a 2008 advisory panel concerning international taxation
  • Also asking that the federal government allow for consolidated tax reporting by Canadian companies

Stay posted for more updates on the Federal Budget and how your business could be impacted!