Jackman-Atkinson: Optimistically cautious

Share

By: Kate Jackman-Atkinson

myWestman.ca

Last week, the Canadian Federation of Independent Business released their most recent business barometer, a measure of small business optimism.  The good news is that optimism among Manitoba small businesses is rising. The bad news is that we are lagging the rest of Canada.

Measured on a scale of 0 and 100, an index level above 50 means that owners expecting their businesses’ performance to be stronger in the next year outnumber those expecting weaker performance. CFIB says that according to past results, index levels normally range between 65 and 70 when the economy is growing at its potential. 

The May index showed that last month, small business optimism in Manitoba was up 2.7 points from April. The May index for Manitoba was 66.3, below the national average of 67.1.  While optimism in Manitoba has improved this year, it’s still below that of other western provinces and below where we were in May of 2013.

Small businesses are an important part of the Manitoba economy.  Especially in rural areas, most of our needs are met by small businesses.  Small businesses sell us groceries, grow our food and serve us lunch.  They employ our neighbours and ourselves.

According to Industry Canada, in 2013, there were a total of 35,980 businesses in the province. Of those, 35,298 had 99 or fewer employees, 622 had between 100 and 499 employees and just 60 had more than 500 employees. We have 37.4 small or medium-sized business for every 1,000 population. Canada-wide, 55.1 per cent of businesses have less than five employees and 98.2 per cent of all businesses have 99 or fewer employees. 

The numbers don’t lie. Small businesses are a significant and important part of our economy. While we have a few large employers, I can’t help but wonder how many of those businesses with 500 or more employees are actually affiliated with government?

With many seasonal businesses in Manitoba, such as tourism and agriculture, the nicer weather in the latter part of May has no doubt helped optimism after a very cold and long winter. But our province clearly faces challenges when it comes to encouraging small businesses. If owners aren’t confident in their business’ success, they will likely leave the industry and are less likely to encourage would-be entrepreneurs.

According to the survey, Manitoba businesses say that their largest limitation on sales or production growth is a shortage of skilled labour, followed closely by insufficient domestic demand. They struggle to grow demand for their business and those who succeed in building demand, then face the challenge of hiring enough staff to meet that customer demand.

On the plus side, few Manitoba small businesses are being limited by a shortage of foreign demand or a shortage of input products. Our businesses tend to be well matched to the inputs available.

In the survey, Manitoba business owners noted that they faced two major cost constraints, wage costs and fuel and energy costs.  Those were cited by 47 per cent of respondents. Followed very close behind, 43 per cent of respondents said that their major cost constraint was taxes and regulatory costs. 

Fuel and energy costs are driven by the larger Canadian and international market, but the other two major cost constraints are, to a large extent, a function of government regulation.  

Provincial governments set minimum wage rates and depending on the industry, these can be a major factor in the cost structure of small businesses. Many small, rural retailers have really felt the pinch from recent raises to the provincial minimum wage. Provincial governments also set many of the taxes and fees paid by businesses. In Manitoba, we have seen a dramatic increase in our taxation, from the added one percentage point of PST to the addition of that tax to previously exempt products and services. 

Nationally, the survey shows that small business owners are the most confident they have been in more than two years. But Manitoba business owners are less confident than they were last year, and that’s a cause for concern. The health of our small businesses is vitally important to the province’s well being, the health of this sector should be important to all of us.