Industry Committee on April 26th, 2022

[Andy Fillmore, Liberal, Halifax, NS]

Thank you.

I just wonder if there's any discussion happening in your department on having an immigration stream that would help Canada meet its skilled trades shortage as we try to address this housing shortage. Is there anything about trades?

[Chris Bates]

Again, that would be a question best answered by IRCC. We do have a number of apprenticeship programs we are looking at to get youth more engaged in the trades and to get marginalized equity-deserving groups more engaged in the trades. It is predominantly a white male-driven occupation, and we need to make sure that it diversifies so that we actually have the labour we need to work in that field. They're good-quality jobs. We need to do more to support and encourage others and create an environment where everybody can work in that industry.

[Andy Fillmore, Liberal, Halifax, NS]

Okay. Thanks.

[The Chair, Liberal, Joël Lightbound]

Thank you, Mr. Bates, and thank you to all of our witnesses for being here with us today.

I'll suspend for a minute to allow for our second panel to join us.

Thanks to all of you. Have a great rest of the afternoon.

I'll suspend for a minute.

[The Chair, Liberal, Joël Lightbound]

Thank you very much to the MPs for their co-operation on resuming this meeting, and to the witnesses.

Today we have Mr. Cléroux, Vice-President, Research and Chief Economist, from the BDC, and Ms. Kastner, Vice-President, Partnerships and Government Relations, from the BDC.

We are very pleased to have you here.

Mr. Cléroux, you have the floor for six minutes.

[Pierre Cléroux, Vice-President, Research and Chief Economist, Business Development Bank of Canada]

Thank you very much, Mr. Chair.

Thank you for the opportunity to be here.

The BDC doesn't need a lengthy introduction, with its 75 years of experience and the heightened visibility it has enjoyed since the start of the pandemic. However, I would like to note that the BDC is the only bank dedicated exclusively to entrepreneurs.

We are a Crown corporation that reports to Parliament, through the Minister of International Trade, Export Promotion, Small Business and Economic Development.

We carry on business as a lender and investor at arm's length from the government. We therefore complement, rather than compete with, private sector lenders.

That means that we take more risks than other financial institutions and that when the economic slows, we step in.

During the pandemic, we provided $2.8 billion in direct financial support and over $4.5 billion indirectly, in collaboration with financial institutions across Canada.

We also offer venture capital and advisory services.

I'm here in that latter context. My economic research team supports not only internal planning within BDC but also our clients, through regular publication of free reports and analysis to help them understand the economic context in which SMEs operate.

Here are some key recent observations of relevance to this committee's study, including those based on a recent trip I made to meet entrepreneurs from coast to coast in order to discuss these current realities.

Demand for products and services will remain strong for most businesses in Canada, which is excellent news. In relation to the committee's interest in supply chains and inflation, supply chain disruptions continue to be a major challenge for Canadian businesses. In our latest BDC survey, 63% of SMEs reported experiencing longer delivery times, and 61% said they are facing price or cost difficulties. Supply chains will continue to be disrupted for at least another 12 months.

The situation is more difficult for businesses that cannot pass on cost increases to consumers. This is the situation, for example, for a client I recently met in the meat packaging industry. His input costs for meat and plastic are increasing, but his clients—in this case, big-box retailers—are refusing price increases. As a result, this mid-sized company's profits are down despite higher sales volumes.

Labour shortages also continue to be a key issue for many businesses. We recently released a labour shortage study that builds on similar work we did in 2018. The proportion of people in Canada aged 65 or more has increased from 13% in 2000 to 19% in 2021. Baby boomers are leaving the workplace, while the working-age population is growing at a slower pace.

From 2000 to 2012, the labour force increased by 12%, but it's only expected to grow by 3.8 % or even less in the current decade. Today, 21% of Canadian workers are over 55, which means that about four million Canadians are going to retire in the next decade. In other words, labour shortages are here to stay, especially in light of expected demand for workers.

The pandemic amplified or added a layer to these long-term trends. Without COVID, there would be 440,000 more people in Canada. Immigration declined by half because of COVID restrictions. Immigration levels should return to normal in 2022. Furthermore, 20% of workers who lost their jobs at the beginning of the pandemic changed fields of employment. As a result, the number of job vacancies more than doubled since 2015, with the gap particularly felt in accommodation, food services and manufacturing.

There are actions entrepreneurs can and do take: 37% have adopted flexible work arrangements, 35% are providing more internal training and 26% are recruiting younger workers. Our advice to entrepreneurs is that they should also consider formal hiring processes, having a more competitive total compensation package, expanding their hiring pool and, more importantly perhaps, given the long-term nature of these shortages, investing in technology and automation. Canadian businesses using automation are performing better and growing faster. Technology is now available in all sectors, including services and retail.

In that context I want to highlight that BDC is pleased to contribute our efforts to the Canada digital adoption program that was launched last month. As part of stream 2 of CDAP, budget 2021 announced $2.6 billion for the Business Development Bank of Canada to help SMEs finance the implementation of their technology adoption plans. BDC will offer zero-interest loans to improve productivity, better serve consumers and become more competitive.

Thank you for your attention, and I hope this lays a framework for a great discussion.

[The Chair, Liberal, Joël Lightbound]

Thank you very much, Mr. Cléroux.

Mr. Deltell, you now have the floor for six minutes.

[Gérard Deltell, Conservative, Louis-Saint-Laurent, QC]

Thank you, Mr. Chair.

Good afternoon, colleagues.

Good afternoon, Mr. Cléroux. Thank you for being with us today.

I'm very happy to hear your remarks, although the labour shortage and the fact that our entrepreneurs may sometimes be missing the recovery train because of the problems we are aware of with the supply chain are still concerning.

You said just now in your presentation that you complement, you don't compete. Can you tell us whether, during the crisis we have been in for the past two years, the BDC managed to take business away from entrepreneurs, in spite of the fact that governments put a lot of effort into helping businesses?

[Pierre Cléroux]

We granted a large volume of loans in 2020 and 2021 to help businesses get through the tough time, particularly in 2020. Private financing fell in Canada, but public financing rose, and the BDC was part of that solution.

[Gérard Deltell, Conservative, Louis-Saint-Laurent, QC]

What have the results been? Have the businesses repaid the loans that were granted, and if so, in what proportion?

[Pierre Cléroux]

I don't have the total proportion, but the percentage of businesses that had trouble is very low. In spite of the tough time in 2020, there was a good economic recovery in 2021 and that enabled businesses to repay their loans. In terms of our portfolio, I don't have the exact figure, but the situation is very good in terms of repayment.

[Gérard Deltell, Conservative, Louis-Saint-Laurent, QC]

It would be important if you could provide us the precise figures sometime this week. If you could break them down by region, type of business and type of loan, including large loans and smaller loans, that would give us a comprehensive picture.

We know that the government offered an immediate contribution of $40,000, $10,000 being non-repayable and $30,000 repayable.

Was your institution involved in that? If so, I would like to get the details. If not, then, to your knowledge, did it enable businesses to get through the crisis? Have those businesses repaid the loans, which came from taxpayers' money?

[Pierre Cléroux]

The BDC was not involved in the project, and so I don't have data about repayment. However, we do a lot of studies on business financing, and they show that the loans granted by the federal government were enormous help for businesses to get through the tough time, particularly in 2020.

[Gérard Deltell, Conservative, Louis-Saint-Laurent, QC]

It may be because I am now a federal MP, but I pay more attention to BDC advertising and maybe even to economic issues. You do a lot of advertising, which is not wrong in itself. Because my background is in the media, I have nothing against people who buy advertising.

However, I still have to say that it's a lot. I understand that you complement the financial institutions and you don't compete with them, but I also understand that your role is delicate and the line is not always clear at some points.

In your advertising, you put a lot of emphasis on the fact that projects have to be inclusive, they have to reflect the modern world, and so on.

Can you tell us a bit more about how you score the application when a business knocks on your door, given the new face of society today that you promote in your advertising?

[Pierre Cléroux]

We have various programs to make sure we are responding properly to the demand from various entrepreneur clienteles. In terms of scoring, each business is evaluated based on the risk associated with its investment project. For example, we have a program to finance women entrepreneurs and entrepreneurs from minority groups. So we do it that way, that is, we don't have criteria for all our clients. We have targeted programs for different clienteles.

[Gérard Deltell, Conservative, Louis-Saint-Laurent, QC]

What percentage of the $2.8 billion that you invested over the last two years in direct aid was devoted to the special programs you just mentioned?

[Pierre Cléroux]

I don't have the answer. We could provide you with that information later.

[Gérard Deltell, Conservative, Louis-Saint-Laurent, QC]

If you don't have the precise answer, that's not a problem, Mr. Cléroux. This isn't the truth tribunal. You can provide us with the figures when you have them.

What is the percentage of success in terms of repayment for each stratum of programs?

[Pierre Cléroux]

Here again, I'll have to provide you with that information later.

[Gérard Deltell, Conservative, Louis-Saint-Laurent, QC]

Do you have a general idea of it now?

Is it close to the norm, or are there more or fewer successes or problems?

[Pierre Cléroux]

I don't have the figures with me, but I can tell you there is not much difference between the various clienteles.

We also have to understand that the BDC is a lending organization that also offers advisory services. From experience, I can say that when both advisory services and financing are offered, businesses have more success. Our research confirms this, too. So this is a way of guaranteeing that entrepreneurs will be successful.

[The Chair, Liberal, Joël Lightbound]

Thank you, Mr. Deltell and Mr. Cléroux.

Ms. Lapointe, you have the floor for six minutes.

[Viviane LaPointe, Liberal, Sudbury, ON]

Thank you, Mr. Chair.

I will be splitting my speaking time with my colleague, Mr. Erskine‑Smith.

Last week members of Parliament had the opportunity to reach out to many local organizations that were successful applicants for funding under the Canada summer jobs program, but as my staff and I called organizations—and we called over 200 of them—we often heard from our local SMEs that while they were grateful for the funding to hire summer interns, they were already struggling to find staffing. Many of them were reduced to the owner and one other staff person, and they've been desperately trying to find employees for some time.

What programs does BDC have available to help our SMEs find and hire the labour they need, especially in a postpandemic economy?

[Pierre Cléroux]

We really focus on technology adoption. According to our research, one of the best strategies that businesses can take in this difficult period of time of finding people is to invest in technology and automation. We looked at the 1,500 companies across the country and at the different strategies they have been using to face the shortage of labour. What we realized is that the number one strategy, the strategy that has the most success, is to invest in technology and automation.

We have different programs to help businesses to find and invest in the right technology. We don't sell technology, so we are independent and can give some advice about which technology they can use. Also, we finance the investment in technology. We really believe that one of the best strategies for businesses is to invest in technology, and we will help them to do that.

[Viviane LaPointe, Liberal, Sudbury, ON]

As we move further into our pandemic economic recovery, it's becoming more and more clear that we are never going back to the way things were. Some have benefited from this change and others have lost their livelihoods, so we need to provide our SMEs with the knowledge and resources to shift their businesses to be successful in our new reality.

We know there is a program that has been designed, the Canadian digital adoption program, to help SMEs. How is BDC helping SMEs through this program?