Thank you very much, Madam Chair.
Good afternoon, members of the committee.
I very much appreciate the opportunity, like my colleagues, to be here with you today. My name is Ken Lancastle. I am the chief operating officer of the Mechanical Contractors Association of Canada or, as we will commonly refer to it, MCA Canada.
Our association represents mechanical, electrical and plumbing contractors across the country working in the industrial, commercial, institutional, residential and service repair and maintenance sectors of Canada's construction industry. This also includes industrial process contractors who are critical to turnaround and shutdown activities for Canada's industrial capacity. Simply put, our members build and maintain the systems that Canadians rely on every single day and the systems that power our economy.
Just to put some of that into perspective, our sector accounts for roughly 40% of all construction activity across the country. We support more than 440,000 direct jobs, and the sector contributes more than $63 billion annually to the Canadian economy. It's an economic workhorse, and it's foundational to Canada's economic strength and our future growth.
Today, as the country faces increased demand for housing and infrastructure as well as industrial development, our sector is going to play a critical role in delivering on that capacity, but we face persistent challenges, particularly with respect to labour availability and productivity challenges.
Governments at all levels have taken important steps to address labour shortages. These programs are incredibly welcomed by our sector, but their full impact will take time while demand for construction is expected to rise in the near term. As well, construction productivity continues to lag compared to other sectors of the economy. Recent studies from Statistics Canada have demonstrated a national productivity slowdown in the Canadian construction industry despite the amount of work required in the years ahead.
The next federal budget provides an opportunity to take targeted action now, action that can remove impediments to business so that our sector, which is so critical to infrastructure and housing development, can continue to build. MCA Canada has put forward four practical recommendations.
First is tax relief on overtime earnings for skilled tradespeople. Construction workers regularly put in additional hours to meet project deadlines; however, those additional earnings are taxed at the same marginal tax rate as regular income, ultimately reducing the incentive to take on extra work. A targeted tax credit would provide a meaningful incentive for certified tradespeople to work additional hours, helping to address short-term labour pressures.
Second, expand the productivity superdeduction to explicitly include construction. Construction is highly capital-intensive. It requires significant upfront investment in tools, equipment and technology, yet tax recovery timelines limit the ability of firms to reinvest. When budget 2025 introduced the productivity superdeduction, construction was not clearly defined or included. Including construction, equipment and technology would allow firms to invest in more efficient tools, technologies and processes while allowing firms to find economies of scale to meet the demand.
Third is enhanced support for tools and personal protective equipment. Upfront costs remain a barrier to entering the skilled trades, particularly for under-represented groups. Increasing the tradesperson tool deduction to $3,000, indexing it to inflation and expanding eligibility to include personal protective equipment would reduce some of those financial barriers and support increased recruitment while making work sites safer and more inclusive.
Finally, strengthen federal prompt payment legislation. We recommend amending the Federal Prompt Payment for Construction Work Act to require the mandatory annual release of holdback on multi-year projects. This holdback is often held until the substantial completion of a project, but it can also mean that millions of dollars are being kept from a project payment supply chain.
Some provinces such as Ontario have already adopted this approach, but the federal framework has not yet addressed it. This change would help to unlock some of that cash flow in the supply chain and support the timely delivery of federal infrastructure projects.
In closing, Canada's mechanical, electrical and plumbing contractors are ready to meet the moment. At the end of the day, if we want to build more housing and infrastructure, we need to unlock the capacity that already exists in the system, and that's what these measures are designed to do.
With that being said, I want to thank the committee again for the invitation to speak here today, and I look forward to any questions there may be.